Student loans or house deposit? 4 options for financially supporting young people

17 Apr 2026

By Chancellor

Whether it’s your children, grandchildren, or any other young person in your family, you may be hoping to give the next generation a strong financial foundation for building their lives – and their wealth.

Indeed, SunLife found that more than 1 in 5 people over 50 gave substantial financial gifts to loved ones between 2020 and 2025.

Not only can gifting help give young people a financial boost early in life, but it can also reduce the size of your estate to mitigate an Inheritance Tax (IHT) bill – as explained in our recent blog.

But deciding how to support young people financially isn’t always straightforward. It’s not just a question of removing the funds from your estate tax-efficiently; you also need to consider how to help the recipient make the most of your gift.

Keep reading to explore four options for giving the next generation a financial boost.

Option #1: Help a first-time buyer get on the property ladder

In January 2026, the Office for National Statistics reported that the average UK house price had risen to £268,000. With a deposit of at least 10% of the property value typically required to secure a mortgage, many young adults are struggling to get on the property ladder.

As such, you might consider gifting a contribution towards a first-time buyer’s deposit. In fact, SunLife found that 18% of the financial gifts made by over-50s were for a house deposit.

You don’t need to wait until your loved one is ready to buy a home to start building their deposit fund. Plus, gifting sooner, rather than later, could simultaneously help mitigate your estate’s IHT liability and boost your gift’s value.

For example, gifting up to £4,000 a year to pay into a Lifetime ISA (LISA) could mean the first-time buyer receives a 25% government bonus of up to £1,000 a year, as of 2026/27.

By helping the next generation onto the property ladder, you could enable them to buy their first home sooner and more easily, potentially avoiding several years of rent payments and further property price increases.

Option #2: Fund tuition fees for higher education

It’s no secret that university tuition fees have become costly. As of 2026/27, standard full-time undergraduate fees can be up to £9,790 a year.

What’s more, the addition of interest charges can mean students repay far more than their original loan amount, with payments often stretching throughout their working lives.

You may therefore be considering funding tuition to help relieve the burden of student debt. However, while the debt can sound overwhelming, it’s important to remember that student loans aren’t the same as traditional debt.

Repayments are generally taken as a proportion of the graduate’s income, and only when their earnings exceed a certain threshold (which varies depending on their student loan plan). Moreover, the debt is usually written off after 25 to 40 years (depending on the plan) or at age 65, whichever comes first.

Ultimately, your loved one may never have to repay the full amount. While funding their tuition can help avoid the career-long repayments, it may not necessarily offer the greatest return on your gift. Additionally, if they’ve already taken out a student loan, helping them to repay early may even mean your funds go towards debt they never would have had to pay off.

Option #3: Invest to build wealth for their future

If your loved one doesn’t have an immediate need for the funds, you might wish to use your gift to build wealth for their future through investing.

Gifting funds to add to their pension or Individual Savings Account (ISA) could help your loved one grow the value of your gift tax-efficiently over the long term.

Pensions

Whether your loved one is under 18 with a Junior SIPP or an adult with a private pension, you can generally contribute to their scheme directly, although limits do apply for certain accounts. Payments into a Junior SIPP are treated as being made by the child and usually receive basic-rate tax relief at 20% (subject to the £3,600 gross annual limit). Contributions to an adult’s pension can usually benefit from at least 20% tax relief, subject to annual limits.

Funds held within a pension are typically invested and grow with tax-free returns. Moreover, money in a pension usually can’t be accessed until retirement, removing any temptation to spend sooner.

ISAs

ISAs also offer a tax-efficient wrapper for growing wealth through investing.

Typically, contributions to Junior ISAs up to £9,000 a year can generally benefit from tax-free growth, while over-18s have a £20,000 tax-efficient annual allowance for use across all adult ISAs.

For both age groups, a Stocks and Shares ISA can allow your loved one to earn returns on investments without being subject to tax.

It’s worth noting that funds held in a Junior ISA become accessible to the account holder at age 18. Funds in an adult ISA can generally be released at any time, and you usually can’t directly contribute to another adult’s account.

Option #4: Gift cash to fund key life milestones and large expenses

Finally, you might choose to gift your loved one cash to help fund a key life milestone, cover a significant expense, or help maintain financial stability.

For example, SunLife found that the over-50s gave gifts for the following:

32% to help with living costs
16% to put towards a vehicle
16% to repay debts
15% to put towards a holiday
14% to help fund a wedding
9% to fund home renovations
8% for financial support after having a baby
7% for financial support after job loss or reduced income.

Offering immediate financial support with the above can have a significant impact on your loved one. In some cases, you could help them get back on their feet; in others, you could help them achieve important goals and milestones earlier in life.

Gifting in life, rather than leaving money behind after you die, could also mean you’re here to enjoy the milestones with them. Whether that’s attending their wedding or enjoying a holiday together, sharing your wealth early could enrich your own life, as well as the life of your loved one.

There are several options for supporting young people financially. Ultimately, the most appropriate choice will depend on your loved one’s circumstances and goals. So, if you’re unsure of the most helpful way to gift, it’s often worth discussing the options with them.

Get in touch

For support to plan tax-efficient gifts that can simultaneously mitigate your estate’s IHT bill and give the next generation a financial boost early in life, get in touch with our financial planners to find out how we can help.

Email info@chancellorfinancial.co.uk, or call 01204 526 846 to speak to an adviser.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals 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.

The Financial Conduct Authority does not regulate estate planning, or trusts.

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.