In theory, when a person turns 18, they become a fully-fledged adult, capable and competent to live their life without any further help from their parents. In practice, young adults often benefit from being able to turn to their parents for help of all sorts, including financial. Possibly the most obvious example of this is the challenge of getting on the property ladder.
Here are five points to consider if you are a parent looking to help your child buy their first home.
Bring in an expert
There are two good reasons for bringing in an expert. The first is to make the most of their knowledge when determining what your options are and the second is to make the most of their experience when determining which option is most appropriate for you and how to make it happen in the real world.
Only promise what you can really afford
You may be willing to sacrifice some, or all, of what you want for your child but, by definition, you need to take care of all essential spending. Sometimes it will be obvious that a particular expenditure is essential, such as your own mortgage payment.
Sometimes, there will be nuance, but even so, it’s generally advisable to err on the side of caution. For example, if your retirement plans are well in hand, then you may be willing to consider the option of reducing your pension contributions for a few years in order to help your child.
This might be appropriate in some instances, but could be very risky in others, hence the importance of speaking to an expert.
Remember that circumstances can change
This point is really a specific aspect of the previous point. Interest rates can go up as well as down, people can find themselves in precarious employment situations, unexpected bills can arise (although having good insurance in place can help with this).
In short, life happens and the longer an arrangement is in place, the longer there is a risk of adverse circumstances impacting you.
Document all relevant information
This may seem harsh, but actually it’s mainly a simple reflection of the fact that relying on a person’s memory is risky to put it mildly. Putting everything down on paper allows all relevant people to check that they are in agreement about the exact details of what is being proposed and only move forward once everyone is happy.
As an added bonus, having clear documentation can help to put you on solid footing if any regulatory bodies decide to take an interest, most obviously the tax authorities.
Think about how other people may be impacted
Even though your money may be legally yours to use as you wish, family (and friendship) relationships general depend on trust and the perception of fairness. This can make life tricky for parents who have children in very different financial circumstances.
With that in mind, it can be helpful to involve other siblings in the discussion and really listen to their views. You don’t necessarily have to act on them, but it would probably be tactful to explain why you didn’t and to make it clear that you are still very much willing to support all your children as best as you can.