Given the current economic environment, many of our existing clients have asked us about what options exist for them to help their adult children.
Property prices have increased significantly over time, meaning that more families are taking on larger home loans to buy the family home. Rising interest rates have increased these loan repayments. Household expenses, rents and HEC’s repayments have also increased. School fees may also need to be paid. Reminiscent to similar times in the early 1990’s family budgets are having to be juggled. Beyond that, adult children are going to need more funds to support their retirement and Government support is likely to be less than it is now.
There are multiple strategies that we have established for our high net wealth clients over time with a view to assisting their adult children. Not all of these are a straightforward cash contribution. Assistance may come in many forms. However, it is important that any strategy or support is researched and well thought out to ensure that there are not any unintended negative effects.
Steps to helping your adult children
1. Evaluate the current situation.
The best place to start is to have a chat with your children and ascertain where they are financially. What are the pressure points, if any? More importantly, are they open to receiving some form of support? Sometimes this is not an easy or straightforward conversation. It may be easier to offer the idea that one of our W2 Wealth advisers talk to them direct. Whilst fully adhering to privacy legislation, we can gain an accurate understanding of their situation.
2. Understand the different options available to you.
There are a wide number of strategies available for parents that will allow them to help their adult children. Simple strategies might include general education, assisting with expenses such as school fees or paying for them to receive financial advice. More complex strategies might include helping them to save for a first home, making contributions to superannuation or protecting assets that they may receive upon your death.
W2 Wealth can help you evaluate the options available to you and outline the benefits, costs, and risks of each one. You and your children will require personalised advice. It is important to complete this step correctly as whichever strategy you choose may impact other things, such as the amount of Age Pension that you may receive or asset protection.
3. Implement the most appropriate strategy.
Once you have decided on the best strategy for your situation, it will need to be implemented. If required, W2 Wealth can help you do this. Again, it is important that the strategy is implemented in a proper and timely manner to ensure that no negative or unforeseen consequences are triggered.
