5 ways the Bank of Mum and Dad can help your children (that aren’t paying for a deposit)


senior man laughs with his two adult sons in the park

In recent years, the so-called Bank of Mum and Dad has become associated with helping your child pay the deposit on their first home. However, it turns out that there are far more popular ways that parents help to give their children the financial security they need in their early adult life.

In fact, a recent poll by interactive investor found that a higher percentage of parents have helped their children with university and car costs than contributed toward a house deposit.

So, how else could the Bank of Mum and Dad support your children? Read on to find out five of the best options.

1. Help with university costs

According to a poll conducted by student money site Save the Student, the average monthly spend for university students in the UK is £810. More than half this figure is spent on rent alone, with groceries, bills, and takeaways also ranking among the top five expenditures for those polled.

A separate Save the Student study found that the average maintenance loan is £5,640 a year. Assuming that your child returns home for the summer and short periods over Christmas and Easter, they will be living on campus for roughly nine months each year.

This means that an average maintenance loan will give them about £625 to spend each month they are on campus, far below a student’s average monthly spend.

By helping them bridge the gap between the loan and the amount they need, your child can fully focus on their studies without the added stress of a part-time job. They can also relax knowing that they will be able to buy what they need each month and start to put any extra into savings.

2. Help with transport and travel fares

Going from A to B is getting more expensive, no matter how you decide to travel. Rising public transport fares mean travelling without a car is costing more each year, but owning a car comes with its own expenses to worry about as well.

Unbiased report that learning to drive could set your child back more than £1,000 before they even own a car, and insurance costs before they turn 24 will be at a premium. Plus, maintenance and servicing could cost them a few hundred pounds each year, and petrol prices are still rising.

By helping to cover some of these costs or offering to help pay for a railcard or bus season ticket, you could help your child travel to and from wherever they need to be without a worry. The extra money they save on travel costs could go towards other financial or personal goals.

3. Let them live at home during their early adult life

Figures from the Office for National Statistics in 2020 estimate that 28% of young adults aged between 20 and 34 in the UK live with their parents. The estimated number of 20-year-olds living at home is 62%, a figure that steadily decreases to 6% of 34-year-olds.

One of the main benefits of living at home as a young adult is the saving on rent costs, especially in areas like London and the south-east of England.

If your child pays rent of £600 a month for five years, that is a total of £36,000 spent on rent alone, excluding additional bills, tax, and daily living costs. They could use this money as the deposit on a home, rather than putting it in the pocket of a landlord.

Once you factor in all the other expenses that come with day-to-day living, allowing your adult child to live at home for a period could save them tens of thousands of pounds.

4. Contribute into an ISA or pension

Helping your child kick-start their savings could motivate them to be better savers in the future and help them act with more financial confidence.

Assisting them with building up an emergency fund in cash could reduce their financial stress and give them the financial security they need to achieve their goals.

Plus, saving into an ISA comes with tax benefits, as any interest, returns, and dividends earned from them are free of Income and Capital Gains Tax. And the earlier your child can start saving the better, as ISAs allow the owner to benefit from compound interest and returns.

Remember that, if you invest money on a child’s behalf, the value of the investments could go down as well as up. Past performance is not a reliable indicator of future performance.

Furthermore, if you instead choose to contribute into your child’s pension, remember that these funds will not be accessible until they turn 55 (or 57 from 2028). So, it’s unlikely to be appropriate for a shorter-term objective, such as saving for university or a house deposit.

5. Help with childcare

Statistics from the Guardian show that the UK is one of the most expensive countries for childcare costs in the world.

A working couple with two children aged two and three can expect to pay 30% of their take-home pay wage towards childcare costs. This figure assumes one partner earns the average wage and the other earns two-thirds of the average wage.

By helping your children cover the early years of childcare, they may be able to put aside more money for future payments and other financial goals. This could be especially helpful if they have a child before they own a house and are trying to save for a deposit.

Get in touch

If you’d more detailed advice on how you might be able to help your children financially, email info@investmentsense.co.uk or call 0115 933 8433.