6 Ways to Help Grown Ups get their Finances in Order

Parents have started handing over thousands of pounds to their offspring in order to help them fly from the family nest; a process which is neither easy nor affordable in an era of post-Brexit inflation, high cost of housing, and university tuition fees.

According to research conducted by experts, around 85% of parents have stumped up their money for everything right from broadband to bookshelves, with an excess of half of the cash coming in from their savings.

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However, getting youngsters started at university is typically one of the biggest outlays. But mums and dads are also subsidising clothes, books, mobile phones, and “spending money”.

This initial hand holding could slowly turn into “failure to launch syndrome”, with kids beginning to rely on their parents financially, in their early 20s and 30s.

If you are a parent who wants to help their kids in getting their finances in order, then you have stumbled upon the right place. Here we have mentioned six ways through which you can help children survive financially in the big bad world.

  • Get to Grips with Property

You can offer a cash gift or an interest free loan to help your kids in order to get them on the property ladder. Ideally, this must be at least a quarter of the value of the property your kid is eyeing up, but even a 10% deposit could give them an access to a more competitive mortgage deal.

Always remember that inheritance tax may be applicable if you die within seven years of making the gift. In order to prevent this risk, you must consider a loan that comes with a monthly interest, under the market rate.

But do agree for a repayment scheme and formalise the contract by making use of a “promissory note”, which is drawn up by the property attorney. In this way, you ensure that the cash is registered as a loan and is paid back.

Alternatively, a guarantor mortgage can do the work. This includes you promising to meet the mortgage repayments on time, if your kids fail to do so. The contract remains in place until the borrower has decreased the mortgage to a certain level in comparison to the property’s worth.

Better-off, parents can also purchase a property outright, but they may incur capital gains tax, especially if it’s later sold, as it’ll technically be their second house. One way you could prevent this is by getting an attorney to place your property in a formal written trust. This way, you lend the trust a deposit and later take out mortgage that you require to guarantee.

The named beneficiaries of the trust, your kids, can then become “life tenants”, and live in that property rent-free. Yet, the named trustees would hold the title to the property.

If you’re turning the house into a student let, you’ll have to pay income tax on the rent, though the income can rather be paid directly to kids as they aren’t earning, then it could fall within the annual tax allowance.

Property experts say that, parents can invest for between 15 to 20 years, so as to assure a return on buy-to-let. You must see it as a long term investment in the first place, and support to the kid. You can even rent to students once your kids graduate, if the house is near the university.

If you’ve already taken out a loan (or thinking of taking one), then you must check for Payment Protection Insurance. If you find out that you’ve been mis-sold one, then you must soon make a claim, as the PPI Claims Deadline has been announced.

  • Drill them in Renting Rights

If any of your kid has to rent, then they’ll have to pay a deposit to the landlord. However, they’ll get it back by the end of their tenancy, provided the place is as clean as it was when they moved in, and there’s no damage, no unpaid rent, and no missing items.

The landlord should make use of an official tenancy deposit plan, unless they also stay in that house. If that is the case, your kid can reclaim the entire deposit along with three times its actual value. You must also check the Government’s “how to rent” guide.

  • Get Help if You Need It

Approximately, two fifths of parents depend upon unsecured debts in order to provide their kids a leg-up. Organisations and universities often offer student scholarships so as to assist students with their living costs.

Your kid might get qualified for this, provided that you’re earning less than £25,000 per year, working in a particular profession, or if your kid is studying a specific subject.

  • Drum in the Savings Habit

Nearly a quarter of parents bail out their adult children each month, but they must also encourage them to save money. The best way out is you training your kids in the virtue of saving, well before they leave the house, and maybe telling them to open a savings account.

If your child is 16 or above, then you ought to tell them to take out a Help to Buy Isa, that offers a 25% Government bonus to a maximum of £3,000, specifically when they’re about to purchase their first house.

Any kid who is 18 can take out a more generous Lifetime Isa, which has been launched recently. This account would pay them a bonus of 25% on contributions of around £4,000 per year. This means that they’ll receive a free maximum injection of £1,000 per year, from the Government.

  • School them to be Savvy

Spiralling education, fuel, and housing expenses mean that inflation is hitting youngsters harder, in comparison to any other age group. Several experts say that, the need for the Gen Y to cautiously handle their finances has become a huge deal than ever.

So, as a parent, discuss unrealistic ambitions and be careful that you aren’t handing down any expensive shopping preferences. You can even pay your kids for doing some of the household work, as this would teach them the value of working.

According to a financial advisor, when one has saved and worked for something, they tend to enjoy it ten times more. By the same token, one might discover whilst saving for it, that perhaps they don’t want it so much after all.

Bear in mind to include your kids in family budgeting, be it through the discussion over dinner, or through some app. All this would give your kids a financial autonomy whilst you supervise them remotely.

Help your child to become “micro-expense” aware. For example, you should tell them how the expense of their daily takeaway coffee can quickly add up. At the same time, you must also encourage them to shop around for affordable deals and to spend more time in reviewing their expenditure.

If you’re paying for any of their necessities, be it the electricity bill or food costs, simply show them how you sought out a much better deal.

  • Offer All-round Sensible Advice

Several studies reveal that on an average, people spend around £1,350 per year on takeaways. So, you should motivate your kids to properly plan their meals, do a weekly shop and learn all the basic recipes when they fly from their nest. In this manner, they could save around hundreds of pounds every year.

You must also help them to understand that when they’re taking out any insurance, it’s not any sort of alternative for locking doors and window, and taking proper care of property is also a very important aspect. 

Author Bio

Adam Martin is a working professional by day and a freelance writer by night. He specialises in writing about personal finance and insurance claims.

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