The modern world is becoming increasingly challenging for younger generations trying to gain a financial foothold.

With the burden of student debt, soaring house prices, and the rising cost of living, many young adults find it difficult to prioritise long-term goals like saving for a pension or building financial security.

Indeed, data from the Office for National Statistics (ONS) shows that the number of families in England and Wales with adult children living at home rose by 13.6% between the 2011 and 2021 Census, reaching nearly 3.8 million households.

Furthermore, financial support from parents continues to play a crucial role. According to Today’s Wills and Probate, gifts and loans from parents used for house deposits totalled £9.3 billion in 2024, up from £5 billion in 2019.

So, with support for the younger generations on the rise, here are six efficient ways to help your adult children.

1. Contribute to their pension

Contributing to your child’s pension is an effective and often overlooked way to support their financial future.

You can contribute up to £2,880 a year into a pension on their behalf, which the government will top up with basic-rate tax relief to make a total contribution of £3,600. Even small contributions early in life can benefit from decades of compound growth, potentially giving them a significant boost by retirement.

Not only does this help secure their long-term future, but it can also be a tax-efficient part of your own estate planning strategy, as it mitigates the total amount of tax your wealth is ultimately liable for and even claims some of it back.

2. Set up a trust

Setting up a trust can be a good way to pass on wealth while retaining control over how and when it’s used.

You can put certain assets into a trust, such as money, property, or investments for your child’s benefit, and appoint trustees to manage them in line with your wishes. This can be especially useful if you want to ensure funds are used for specific purposes, like education, housing, or retirement.

Trusts can also offer Inheritance Tax (IHT) planning benefits, as typically, once assets are placed into a trust, they are no longer considered part of your estate for IHT purposes.

A financial planner can help you choose the right trust for your situation that ensures your assets are used efficiently and your child is supported.

3. Give them gifts within the allowances

Gifting is a simple and effective way to support your adult children and when done within the right limits, it can also reduce the value of your estate for IHT purposes.

Each tax year, you can give away up to £3,000 under your annual gifting allowance, and if unused, this can be carried forward one year, meaning you can gift up to £6,000 in total. Couples can also combine their allowances to gift £12,000 annually without incurring IHT.

Beyond the gifting allowance, there are further tax-efficient options including:

• Wedding gifts of up to £5,000 depending on your relationship
• Small gifts up to £250 to unlimited people, provided they’re not part of a larger gift
• Regular gifts from income as long as they don’t affect your standard of living.

These allowances let you provide immediate and meaningful support, and can also reduce the size of your taxable estate, which can help improve your IHT efficiency.

4. Don’t sacrifice your own goals

While helping your adult children is admirable, it’s important not to do so at the expense of your own financial security.

You may be tempted to dip into retirement savings, take on debt, or delay your personal goals, but you need to remain stable when supporting others. If both of you end up financially insecure, then neither will have the foundation to support the other when they need it.

So, make sure your retirement plans remain on track and any adjustments you make are in line with your overall goals. And try not to dip into your emergency funds or take on more debts as they can have adverse effects that could compromise your future stability.

5. Create a well-structured estate plan

One of the most effective ways to support your adult children over the long term is by putting a well-structured estate plan in place. This ensures your wealth is passed on efficiently and in line with your wishes.

A financial planner can help you update your will to maximise its efficiency and ensure that your children and other beneficiaries receive more of your wealth. They can also work with you to explore other strategies such as setting up trusts and using gifting allowances to better support your loved ones.

By planning early, you can help your children benefit more from your legacy.

6. Speak to a financial planner

A financial planner can help you explore tax-efficient ways to support your adult children, whether they’re buying a home, starting a family, or saving for the future. They can also work directly with your children to understand their goals and values and help set them up for long-term stability.

By taking a holistic view of your family’s finances, a financial planner can ensure your support is structured in a way that improves your family’s financial wellbeing, now and for generations to come.

To speak to a financial planner, get in touch.

Email at info@blueskyifas.co.uk or call us on 01189 876655.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.