As your wealth grows, you may want to use it to give the younger generation a stronger start and the means to pursue their own life goals.
For example, you might want to help them save towards the deposit for their first home or even bolster their pension fund to further their ability to secure a comfortable retirement.
With rising house prices and inflation persistently above target levels, your support may be needed now more than ever.
However, before you give any financial help to your children or grandchildren, it’s first important to assess the various ways of doing so to ensure you remain efficient and don’t inadvertently affect your standard of living.
Continue reading to discover how you can help your younger loved ones work towards their dreams.
High property prices and inflation make it challenging to save for retirement or a home
The younger generations are seemingly finding themselves locked out of the housing market.
The Independent reveals that the average house in England costs £286,594 as of September 2025, which is nearly six times higher than the £50,679 average in 1995.
Meanwhile, the average salary has only risen from £15,034 to £37,430 over this time, and the amount of wealth needed for a deposit is 10 times larger.
Unsurprisingly, this has forced many first-time buyers to depend on support from their family. Indeed, 52% of them received help from relatives in 2024, amounting to £9.6 billion in gifts and loans.
With so much saving required for a first home, saving for retirement may also have fallen low on your children or grandchildren’s priority list.
According to a survey of 2,000 18- to 25-year-olds in the UK, the Money & Pensions Service found that almost a third (29%) had never contributed to a workplace or private pension.
This could quickly hamper their ability to enjoy their desired lifestyle in the next phase of their lives.
4 practical ways to support your younger loved ones
If you want to assist a child or grandchild without affecting your own financial stability, you have several practical options.
- Bolster their pension
While retirement might feel distant to a young adult, starting early can provide significant financial growth.
This is thanks to compounding, which is essentially “growth on growth”. Even small contributions now could snowball considerably over several decades.
You can contribute to another adult’s pension, and they will still benefit from tax relief up to the value of the “Annual Allowance”. As of 2025/26, the Annual Allowance for most people is either £60,000 or 100% of earnings, whichever is lower.
You can also contribute to a child’s pension. However, you can only tax-efficiently contribute £2,880 as of 2025/26 if they are under 18. The addition of the government’s basic-rate tax relief would increase this to a total of £3,600.
Contributing to your child’s pension could give them a financial boost, all while demonstrating and instilling healthy saving habits.
- Set up a trust
Trusts are essentially legal arrangements that allow you to set aside certain assets, such as money, property, or investments, for your child to make use of in the future.
They allow you to specify exactly how and when your younger loved one can use the wealth. You could, for instance, state that they can only access it when they’ve completed higher education.
Doing so could give you the control to ensure that your child or grandchild is financially responsible enough to use your wealth solely to achieve their dreams.
Trusts can also help you mitigate Inheritance Tax (IHT), as once assets are placed within, they’re typically no longer considered part of your estate.
Just remember that trusts tend to be highly complex, so it’s worth speaking to a financial planner before you set one up.
- Contribute to a Junior ISA
Introduced in 2011 to replace Child Trust Funds, Junior ISAs (JISAs) allow you to put money aside for children in their name.
They are as tax efficient as their adult counterparts, meaning your child’s money can generate growth free from Capital Gains Tax, Dividend Tax, and Income Tax.
As of 2025/26, you can pay in up to £9,000 each year, and your child can typically take control of the account at the age of 16 and access the funds once they reach 18.
There are two forms of JISA:
- Cash
- Stocks and Shares.
Cash JISAs allow you to simply save money for your children while earning interest, much like a regular savings account, but with the added tax benefits.
Meanwhile, a Stocks and Shares JISA allows you to invest on your child’s behalf. This means you can place money in funds, shares, or other investments to generate higher long-term growth than cash savings typically offer.
You don’t necessarily have to choose between one or the other, and you could open both accounts and split the JISA allowance across them as you like.
The funds you save in a JISA could give your child or grandchild a helpful boost when they start their adult lives.
- Make use of a Lifetime ISA
A Lifetime ISA (LISA) is another tax-efficient account that could help you save for your younger loved one’s future.
LISAs are available to anyone between the ages of 18 and 39 to help them save towards the deposit for their first home or for retirement.
Your child or grandchild can save up to £4,000 each tax year in a LISA, which counts towards their overall ISA allowance (£20,000 in 2024/25).
The government essentially “tops up” any LISA contributions by 25%, up to a total of £1,000 each year.
Just remember that the rules surrounding LISA withdrawals can be restrictive.
If your child or grandchild doesn’t use the funds to purchase their first home, they need to keep them saved or invested until they reach the age of 60. Otherwise, they will face a 25% penalty on their withdrawals.
- Give them gifts
Gifting your wealth is one of the simplest ways to support your children, all while reducing the value of your estate for IHT purposes.
The annual gifting exemption allows you to make IHT-free gifts each year without any tax implications. In 2025/26, it stands at up to £3,000. You can carry this forward by one year if you don’t use it, and couples can combine their allowances, allowing you to potentially give £12,000 in a single year.
On top of this, there are several other gifting allowances you can make use of, such as:
- Wedding gifts of up to £5,000, depending on your relationship with the couple
- Small gifts up to £250 to unlimited people, provided they’re not part of a larger gift
- Regular gifts from income, so long as they don’t affect your standard of living.
This gives you the flexibility to support your children or grandchildren save for deposits, education, or retirement, while reducing the value of your own estate.
It’s important to set clear boundaries and not compromise your own financial security
While it’s admirable to support your younger loved ones, it’s important to ensure you don’t inadvertently affect your own financial security.
Using retirement savings to help your children, or taking on debt to assist them with buying a home, could place both of you at risk in the long term.
As such, it’s vital to establish clear boundaries. Be transparent with your child or grandchild about what you can afford and whether the support is a gift or a loan.
If it is a loan, you may want to create a written agreement that sets out repayment terms, ensuring any expectations are clear.
You may also benefit from speaking with a financial planner.
We could help you explore several tax-efficient strategies for supporting your family, while ensuring you stay on track to achieve your own long-term goals.
If appropriate, we could even work directly with your children or grandchildren to help them develop their own goals and build their financial security.
To find out more about how we could help, get in touch.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
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.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
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.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate estate planning, tax planning, or trusts.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
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