Up and down the country, parents are preparing for the departure of their children for university. There will mixed feelings, tempered by the fact that student debts and high property prices mean that they will probably be back under the family roof before too long.
But – although children are now commonly living in the parental home in their 30s – sooner or later the move out will be permanent.
How do you deal with the economic impact of an empty nest?
Some new financial realities
There may be an emotional price to pay when your offspring leave home, but you may find that it is compensated for by a sudden decrease in bills. Savings in grocery costs with one less mouth to feed can be followed by a reduction in utility bills and other everyday expenses. You might find a smaller car is all that you need.
The chances are you will suddenly have more disposable income, and more financial freedom than you have had since you were young and carefree.
Look at your debt
The very first priority for any extra money you suddenly find yourself left with at the end of the month must be to deal with debt. All debt has costs, and it makes sense to deal with the most expensive first. For most people, this will be the balance on their credit cards. If you have any loans, check if you can pay them off early without penalties.
The next item may be your mortgage, if you still have one. Extra cash may mean you can start overpaying each month, which will get the remainder paid off faster.
Look at your home
Of course, your empty nest might not need to be as large as it did when it was full. Downsizing could be a quick way to living mortgage free if you have not paid it already, and could release some cash if you have.
Moving can be an ordeal, so you might want to take the opportunity to make that move to a home ideal for your retirement.
Look at your pension
Debts paid off and more cash to spare, you can start looking to the future. You pension is probably your best ever investment, and you can put up to £40,000 per year in it. It could be well worth doing so if you could afford it – you can take a private pension from the age of 55, so the cash need not going to be locked away for too long. Building a large pension pot is easier if you start young – but it’s never too late to add more.
Look at your savings and investments
You might also look at other investments. An ISA may be a very good idea for most people, and there is a wide range to choose from. Stocks and Share ISAs can offer the promise of good returns, although the current volatility in the stock market as a result of Brexit may make you cautious about committing too much of your extra wealth.
Look at the future
Becoming an empty nester is a major stage in life for most of us and your priorities will change as much as your monthly budget. It’s a good time to look at your financial plans. An appointment with an expert from the Continuum team might be a good place to start.
The value of investments can fall as well as rise and you may get back less than you invested.