Parents who want to reclaim their lives once their children are grown-up need to give them a helping hand as they shove them out of the nest.
A few years ago research showed that most married women had a stash of cash they kept secret from their partners. Why? It was their ‘running away fund’ - and having it made women feel less stressed in their relationships and, maybe, less like running away.
Today, I recommend that all parents set up a kick-out fund as early as they can to help reduce the offspring-anxiety complex. A big factor in this is: ‘When will I see the last of them?’ More and more parents have their adult children living with them because they can’t afford their own home. Not surprising, considering that NatWest expects students starting courses this year to graduate with average debts just under £15,000.
Get information on leading Child Savings PlansGood old inflation!I didn’t start my adult life with a barrowload of debt. Soon after graduating and getting a job I got onto the property ladder. Back in the inflationary 1970s, this was a one-way street and I and my generation never looked back financially.
The real key to how it worked for us was that inflation eroded the value of our mortgages. Five years of inflation at 10%, five years of pay rises at 10%, and over half your debt was wiped out in real, spending power terms. Terrific!
Inflation, which politicians have turned into an all-purpose bogeyman, was actually good for the working poor and the middle classes. The guys who really lost out from inflation were the rich and the retired.
Today, I’m less sure that property will build wealth in the same way it did for my generation. Yes, the past five years have seen big property value gains, but that was largely due to a one-off fall in interest rates and I believe the property boom can continue only if we get an upsurge in inflation.
Click here to see our Child Trust Fund best buysNo chance without cashAnyway, parents rightly want to give their kids a helping hand into adulthood and today, that means money - money to help pay off those graduate debts and to ease their way into the property market.
Today, the average first time buyer (FTB) home in the South East costs £165,000 according to Halifax (London £211,000, Midlands £130,000). To get the best mortgage deals you need a 10% deposit, so with all the extras you need about £20,000 to get started - in fact the average FTB deposit in London is over £30,000.
Now as a parent you can either sit and worry gloomily about these figures or you can grasp the nettle and do something. The best thing you can do is set up a kick-out fund. Be clear that this is what it’s for - to get the kids out of your home and into their own. But don’t be sentimental about it. The kids won’t care how you feel so long as they get the money. So what’s the best way to feed your kick-out fund? Use my countdown clock:
Get free information on leading Child Savings Plans hereThey’re at college! Only a few years to go…* Use high-interest regular savings schemes to get a better return. You can easily get 7% from your own bank and from others. It doesn’t have to be new cash from your earnings - you can also recycle money you already have in savings accounts that’s earning lower rates. See my
recent feature on this.
Top up on tax-free cash. Put the maximum £3,000 into a
mini-cash ISA and use our best buys to collect up to 5.5% tax-free. Do the same again next year.
Get top rates on your rainy day cash. Too many people think 4% is OK. It isn’t - you can get as much as 5.5% -
see our current best buys.
No time to think about the future…Because the kids are involved in so many things and there’s all the school stuff to deal with and hobbies and holidays… hang on, their future depends on you thinking ahead.
Set up a regular saving scheme in a
self-select Individual Savings Account (ISA) with a fund supermarket. Over periods of five years or more stock market savings plans usually beat cash deposits by a distance - the longer the term, the more likely it is you’ll end up with a healthy profit.
Use our Best Buy fund selections - start with a
UK Equity Income fund. See my
recent review of these funds
If you’ve got spare capital, put some into four- or five-year
fixed rate bonds - you can get up to 5.7% over a five-year term.
They’ll never grow upDon’t let having delectable tiny tots addle your brain. The years will gallop by, so get Father Time on your side with compound interest.
Save some or all of their child benefit in a monthly savings scheme. See
recent feature.
Get grandparents and other relatives to top up their
Child Trust Fund account - see article
If they’re not eligible for CTF, start a monthly savings scheme with an investment trust like Foreign & Colonial, Baillie Gifford or Alliance Trust.
Click here to see our Child Trust Fund best buys
