Helping your adult child to fly the nest

Having adult children living at home is not what many parents bargained for when they made the decision all those years ago to have a baby.

Yet a growing number of young people have been squeezed out of the housing market in England, according to a recent English Housing Survey, which is one reason why we are seeing more adults living at home with their parents.

The survey showed that during the financial crisis there was a fall in the proportion of under 35’s owning their own home; 21% of people in this age bracket were mortgage holders in 2008-09, however this fell to 18% in 2012-13.

For those who have adult children living at home this situation can work well, particularly if they contribute financially and are of the mind-set that they want to be independent. However it can be difficult when the boundaries become blurred and adult children simply become comfortable, allowing their parents to take financial responsibility. Patience can be lost when adult offspring simply ‘give up’ the focus of moving on and grow accustomed to having no ties or pressures placed on their income.

There comes a point for some parents when the challenges which prevent their offspring leaving need to be overcome in order to help them on their way. This is where a wealth planner can work with the whole family to help review an overall wealth situation and to set financial savings and investment goals to work towards. One of the biggest mistakes people make is having ideas of what they would like to have in the future, but not putting in place the small financial steps in order to achieve those dreams.

Five tips on how you can help your children move out of home.

1. Set some financial goals. If the aim is to buy a property in five years then set a deposit amount, break it down into monthly amounts and start saving or investing into a New ISA to achieve that aim. For medium to longer term savings (e.g. 5 years+), a wealth planner can help you to choose the right equity ISA based on your attitude towards taking investment risk, and a rigorous saving plan will get your adult child prepared for the significant cost of buying and running a home.

2. Talk openly and honestly about inheritance tax planning, particularly if there are wealthy grandparents still in your lives. Inheritance tax planning can avoid thousands of pounds being paid in tax by gifting money or protecting it through Trusts. Speak to a wealth planner to find out if you are affected.

3. Don’t be frightened by the concept of Equity Release. Equity Release can be used as an effective financial planning tool, particularly if an elderly parent or grandparent is in a high value property which, due to their other financial circumstances, will be unavoidably liable to inheritance tax on death. Releasing some of the equity and allowing future generations to buy property now can, in some cases, make financial sense. Equity Release should be discussed with a specifically qualified wealth planner and ideally in conversation with wider family members.

4. Review your existing investments. Too often parents can hold onto large sums of wealth because they are worried that they might need it for a rainy day. It may be that you can help your child with a deposit for a home if you have a greater understanding of how your existing money is invested and a clear understanding of how that wealth can provide an income, now or in the future.

5. Don’t be frightened of giving your adult child a push in the right direction. Financial responsibility can be overwhelming, but learning to approach large monetary projects with a well-planned strategy is a skill that is rarely taught or easy to acquire.

This article is for information purposes and should not be treated as advice. Individual circumstances should always be considered prior to purchasing any financial products. For further information please contact your Wealth Planner.

Sanlam is a trading name of Sanlam Wealth Planning UK Ltd (Reg. in England 3879955) and English Mutual Ltd (Reg. in England 6685913). English Mutual Ltd is an appointed representative of Sanlam Wealth Planning UK Ltd which is authorised and regulated by the Financial Conduct Authority.

To find out more wealth management speak to your Wealth Planner.

If you currently do not have a Wealth Planner, we would be delighted to help, please email letstalk@sanlam.co.uk