How to financially help your children leave home

Increasingly, parents are finding their children either still at home in their 20s and 30s, or returning home after university. It’s a phenomenon that’s given rise to the term ‘Boomerang Generation’.

We love our children but how can we help them get started and stand on their own two feet? What if you could do this and gain some attractive inheritance tax breaks along the way?

Financially helping a child

1. Help your children get a foot on the property ladder

As property prices rise again, it’s getting harder and harder for our children to buy their first home, or step up onto the next rung of the ladder if they’re already on it.

Several lenders now offer mortgages where parents can join forces with their children to secure a more affordable mortgage. With attractive rates and using the parental home as security, it can bring forward the date your children flee the nest quite considerably.

2. Gift money to your children

If using your property as security doesn’t quite sit right with you, you could use your £3,000 annual gift exemption allowance and make small regular payments to your children’s savings account.

You can gift larger sums of money, but you need to survive for 7 years after giving the gift in order for it to be inheritance tax free.

3. Secure your children’s longer term wealth

From the time they leave university, your children will be in debt. The housing market will also zap a higher percentage of their income, leaving less for them to direct towards saving for later life, let alone retirement.

By kick starting a pension for them, your ‘gifted’ money will not only grow over a long period of time, it will also benefit from the appropriate tax relief added to it each year by the Government. Better still, your children can’t access it until they’re 55 so you don’t need to worry about it being frittered away before then!

According to the Office for National Statistics†, there was a 20% rise in adult children living at home aged between 20 and 34 in 2011 compared to 1997. During this time, the actual numbers in that age group remained relatively static.

Whilst we do love having our children around, sometimes it’s nice to have the time and space away from them to miss them! A little help to get them on their way is always welcome on both sides.

What financial ‘incentive’ have you put in place to give your children that gentle nudge out the door when the time comes? Let us know below.

Source: † Office for National Statistics

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