5 important financial steps to take if your employees have been left as an “empty nester”

If your employees have children who are leaving home and heading to university for the first time this autumn, they might be left with an “empty nest”.

This can be emotionally challenging, but it could also leave them financially better off and with more time to get on top of the money-related tasks they’ve been neglecting.

Keep reading to find out about five simple steps your employees can take now to make the most of their newfound freedom, by taking financial stock and revisiting their provisions.

1. Revisit their household budget

With fewer people in the house, they’ll likely see their electricity and utility usage fall. Their grocery bills might drop too, potentially freeing up additional funds. However, if their child was contributing rent, the loss of this income could begin to balance out savings elsewhere.

Either way, a change to living arrangements would mean it’s important for your employees to revisit their household budget.

They can begin by listing (estimating where they need to) their new monthly income and expenditure. They should be able to identify areas where changes have occurred.

Where they can see drops in spending, employees could use these as starting points to find other areas where they can cut back. Maybe their child used subscription services that can now be downgraded to a standard tariff or cancelled entirely.

Employees should remember to check in with their emergency fund too. The current climate might have lowered its real-terms value so they need to be sure it’s still fit for purpose.

If their child isn’t yet fully financially independent, parents should think about the contingency they might need if they struggle to manage their budget, and factor that in too.

2. Review their retirement savings and investments

High UK inflation and the cost of living crisis have meant hard times for many recently. Your employees might have been helping their children financially. Maybe they plan to continue offering financial support during their higher education.

Understandably, they will want to assist their loved ones, but doing so without hindering or upending their own long-term financial plans is key.

According to a recent Guardian report nearly a quarter (22%) of British savers have either stopped (14%) or cut back (8%) on pension contributions since the cost of living crisis started.

While this might seem like a good short-term fix, whether your employees are struggling themselves, or looking to help a child in need, the ramifications for their retirement could be huge.

As well, it may be beneficial for employees revisit their savings and investments to ensure that they remain on track.

With inflation still high, albeit falling, cash savings could be losing value in real terms. Turning to investment, by topping up pensions, or through a Stocks and Shares ISA, for example, might be a good option.

3. Look again at the amount and type of debt held

After years of saving and imagining their dream retirement, the last thing your employees will want to do is carry debt into their life after work.

Deciding when and if to overpay a mortgage is a difficult choice and might require expert help. But high-interest debt like credit cards can be debilitating too, and could also mean that they need advice. This is especially the case as interest rates rise.

Whatever their current level of debt, your employees should remember to pass on what they know to their child. University is an exciting time but it can be easy to lose track of spending and amassing debt early in life could have long-term consequences.

4. Think about protection

In a report from July 2023, using data gathered as part of its Financial Lives 2022 survey, the FCA confirmed another worrying trend among Brits struggling with rising living costs.

The report found that 13% of policyholders cancelled insurance and protection, or reduced their level of cover, in the second half of 2022. This was specifically as a response to the cost of living crisis and amounts to around 6.2 million people.

Your employees might have term policies designed to support their children until they reach adulthood, decreasing cover aligned to their mortgage, or death in service as part of their employment.

Once their child has reached adulthood, or their mortgage is paid off, they will need to revisit their protection needs. Even something as simple as a change of job could leave them without vital cover, so checking in with it now could help make sure that your employees have all the protection they need.

5. Be sure that their will and estate plans remain fit for purpose

Traditionally, inheritances were given on death and outlined in a will. While this is still the case for many, the last decade or so has also seen a rise in “giving while living”.

Either way, estate planning isn’t something to think about only in later life. Instead, it should be built into your employees long-term financial plans from the outset.

Life events like births, deaths, marriages, divorces – and children moving away from home – can all change their priorities. They could consider revisiting their will and then thinking carefully about the benefits of giving while living.

By making the most of HMRC exemptions to gift tax efficiently, your employees can lower the value of their estate for Inheritance Tax purposes. They will also have the benefit of still being around to see the difference their money makes.

If employees are uncertain about what steps to take, it’s important for them to seek expert advice and guidance. Children moving away from home is a huge life moment, but it’s also a good time to get their financial house in order.

Get in touch

As an employer, ongoing financial education can be beneficial, if you’d like to learn more about how you can support your employees with their financial wellbeing, we can help.

Email info@second-sight.com or call us on 0330 332 7143.

 

Please note

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.

A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.

Your home may be repossessed if you do not keep up repayments on your mortgage

Equity investments do not afford the same capital security as deposit accounts.

The Financial Conduct Authority does not regulate taxation, trust advice and debt management.

Sources: https://www.theguardian.com/money/2023/sep/04/britons-cut-pension-contributions-hargreaves-lansdown-abrdn  /   https://www.fca.org.uk/publications/financial-lives/financial-lives-january-2023-consumer-experience