Homeownership is an increasingly difficult thing for young people to achieve. Interest rates are rising, as is the cost of living. For those in rented accommodation, saving for that deposit can involve a long, difficult process of self-sacrifice and financial discipline.
If you’re the parent of someone in this situation, or you believe that you might be such a parent in the future, you’ll naturally want to do everything you can to help. Fortunately, there are a few concrete things that you can do.
Financial Planning and Savings
Getting a foot on the housing ladder means having a lot of money. If you don’t have a lot of money available, then it’s time to think about how you’ll build it. Get an idea of how much of a deposit is required for a small home. Then determine how much you need to save every month to meet the target within a given timeframe. If you need ten thousand pounds and you’d like to get things moving in five years, for example, then a hundred pounds a month should be more than enough.
A savings account and a regular monthly payment can build a sum steadily over time. If it happens automatically, saving is much easier to do than if it involves conscious effort. Certain kinds of accounts, like a Lifetime ISA, can be especially effective – since the government will match the payments being made into the account.
Teaching Financial Responsibility
Teach your children the right financial lessons, and they’ll be much better equipped to make their money work for them. Teach them to distinguish between an asset and a liability, and to invest in the former. Teach them how to delay gratification, and to build the right financial habits. Don’t rely on the school to provide these lessons: instil them yourself.
Mortgage Assistance
Even if you’re not directly contributing to the deposit, you might help in other ways. You might contribute to the legal costs. Solicitors can be expensive, even if you don’t need to worry about stamp duty. While conveying negligence claims can help you get back the money should things go wrong, you still need to worry about a hefty bill when things go right!
You might act as a guarantor on the mortgage, putting money into the deposit and taking it out later with interest.
But the truth is that the really effective strategy is the direct one: simply give your offspring the money they need to make a deposit. Inheritance from a grandparent, or a gift, can really help to accelerate things.
In fact, the truth is that the difference between people who successfully save for a house and those who don’t is almost always down to how much money is being passed down from within a family. According to one recent study, one in four homebuyers under 25 fund their purchase in this way.
Always good to plan ahead – thanks for your advice
I can’t believe how much harder it will be for young people today to get on the housing market compared to how it was all those years ago when I bought my first flat