Today – Are you saving for retirement or your child’s first home?

It’s well reported that people in the 20-40 year old age bracket are currently struggling more than ever before to save enough money to put a deposit down on their first home, and many are struggling even to meet rent payments. The result is that a lot of parents are helping their children to get on the property ladder, and according to this article parents in London are now much more likely to support their children in buying property than in pursuing higher education.

Are you saving for retirement or your child’s first home?

While it’s great that many parents are able to help their children, there is also a concern that this will jeopardise parents’ ability to save for their own retirement in an economy where pensions are unstable and people are having to work much longer before they are able to retire with a secure income for their older years.

If you want to help your children buy their first property, there are various options for doing this. Many parents simply pay, in full or part, the deposit on their child’s first home. Raising the deposit is for many young people the toughest part of securing a home, so it’s a bit of one off help that many parents offer their kids. It is important though to be aware of the tax implications of giving a lump sum of money to one of your children.

What the alternative to saving for retirement or your child’s first home?

An alternative is to set up a joint mortgage such as the Family Springboard from Barclays. This allows you and your child to combine incomes to secure a higher mortgage; but your child remains responsible for the mortgage payments. As with any scheme of this kind, it’s essential to fully understand all the terms and liabilities that come with it – but this is an option that can be well worth exploring.

Alternatively, some parents will actually buy a second property themselves and rent it out to their child, in some cases allowing them to eventually own the property or leaving the home to their child as part of their inheritance. This is perhaps the biggest investment a parent can make to help their children onto the property ladder.

Barclays recently ran a survey to find out how many parents are saving for their child’s first home as well as, or instead of, their own retirement. About 20% were saving for their own retirement over the 13% saving for their kids’ first home; but 25% said that they are saving for both. This supports the notion that many parents are prioritising their kids’ future alongside their own. The support of parents is clearly becoming more and more of a long term commitment – but it is very important to remember your own retirement planning while you think about how you can support your kids in their futures.

Are you saving for retirement or your child’s first home? is a guest post – you might also like my post on retirement planning mistakes you must avoid