Empty nester

5 important financial steps to take now as an “empty nester”

If your children are leaving home and heading to university for the first time this autumn, you might be left as an “empty nester”.

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

Why not make the most of your newfound freedom by taking financial stock and revisiting your provisions?

Keep reading to find out about five simple steps to take now.

1 Revisit your household budget

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

Either way, a change to living arrangements means it’s important to revisit your household budget.

Begin by listing (estimating where you need to) your new monthly income and expenditure. You should be able to identify areas where changes have occurred.

Where you can see drops in spending, use these as starting points to find other areas where you can cut back. Maybe your child used subscription services that you can downgrade to a standard tariff or cancel entirely.

Remember to check in with your emergency fund too. The current climate might have lowered its real-terms value so be sure it’s still fit for purpose.

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

2 Review your retirement savings and investments

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

Understandably, you’ll want to assist your loved ones, but doing so without hindering or upending your 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 you are struggling yourself, or looking to help a child in need, the ramifications for your retirement could be huge.

Now is a great time to revisit your savings and investments to ensure that they remain on track.

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

If you’ve found yourself in an empty nest, with a new set of financial challenges to think about, get in touch now and we can help you to review your options.

3 Look again at the amount and type of debt you hold

Once you’ve spent your career saving into a pension and imagining your dream retirement, the last thing you’ll want to do is carry debt into your life after work.

Deciding when and if to overpay your 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 you need advice. This is especially the case as interest rates rise.

Whatever your current level of debt, remember to pass on what you know to your 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 for your child.

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.

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

Once your child has reached adulthood, or your mortgage is paid off, you’ll need to revisit your provision. Even something as simple as a change of job could leave you without vital cover, so check in with it now to ensure that you have all the protection you need.

5 Be sure that your 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 long-term financial plans from the outset.

Life events like births, deaths, marriages, divorces – and children moving away from home – can all change your priorities. Revisit your will and then think carefully about the benefits of giving while living.

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

Get in touch

Children moving away from home is a huge life moment, but it’s also the perfect time to get your financial house in order. To learn more about how our financial planners can help you manage your empty nest and emerge financially stronger, email us at advise-me@fosterdenovo.com or call us on 0330 332 7866. fosterdenovo.com

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.