Let us continue our discussion about helping children into properties. In Part 1 I talked about the mechanism, but today I want to talk about the equity.

Mum and Dad or the trust have helped Johnny into his home and it has worked out well. The problem is a couple of years later Mary and her partner come along and they want financial support as well. How do we maintain equity between children particularly in a market where house prices are increasing? Also how do we recognise differences in income earning abilities of children?

There are a couple of options, but I think the first thing is the rules should be set when the first child is supported, and the rules should be made clear to all family members.

If you are going to do something for one child, you are going to have a good think about being prepared to do it for all of them. Obviously Mum and Dad can decide an arbitrary amount depending on the financial position and needs of a particular child but there should be a limit to it and I think that is what we need to explore. In our mind the easiest way to do it from experience is to benchmark it against a property value. It might be the median house price in Auckland, it might be a house in a particular area. Now you might be expecting that children are just going to buy an entry level house, but we end up having these conversations with children who are looking to buy a $3m or $4m house as their first home with Mum and Dad’s support. So be prepared for some big numbers in these conversations. Expectations may need to be managed.

If you are going to benchmark and peg it; obviously you are going to need to have a very clear understanding of what that benchmark is and again how does that apply if one child is in Auckland and the other is in Dunedin. A deposit in Auckland might just about buy you a house in Dunedin or not quite but it is going to go a lot further. Obviously again issues around repayment and relationship property protection that we discussed in Part 1 are relevant.

The only other alternative that I have come across actually came from the Top Gear show that I watched many years ago. A couple of wealthy people in the UK came up with a very interesting comment that has always stuck in the back of mind. What they said is that they would match the savings of a child towards a house however they put a twist on it. For a child who became an accountant or a lawyer and was able to earn great salaries they might get two times the savings matched from Mum and Dad. But for a child that went and pursued a social good a nurse, a teacher, a doctor who might not earn that sort of amount or might have a higher student loan in the case of a doctor, Mum and Dad might match that 4 times the amount saved by the child. Accordingly, there are some different options out there that are worth exploring.

When I sit down with families, I need to understand what works for them. I work from the premise that one size does not fit all and that what works for one family may not work for another. At the heart of any discussion is the fact that Mum and Dad need to be able to afford it and if this is the case then it needs to be equitable across the children.

We have got to balance the sense of entitlement and the social conscience that is being pushed on to parents these days that they must support their children. I don’t know about you, but I know I certainly didn’t get a lot of support when I bought my first house, and I didn’t expect it. It is something that we need to sit down and talk to our clients about and as an advisor or trustee we need to be part of that conversation.

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