Carrie Heron: Younger generation need help - and there are plenty of options

Carrie Heron, financial services expert at Brewin Dolphin, shares her top tips on supporting your children or grandchildren financially.

1 Cash deposits

Keeping cash in a savings account can mean it is easily accessible and can be used to fund "emergency" items. Make sure the interest rate offered by the bank or building society is competitive. It must also be remembered that any interest paid is taxable. Save the pennies and the pounds will save themselves.

2 Tax-efficient savings

Capital in individual savings accounts (Isas) can be held in cash or stocks and shares. The cash option is a less risky route as it is basically a deposit account, while investing in stocks and shares will expose your capital to the equities market. The annual allowance is currently 10,200, including up to 5,100 in cash.

3 Regular savings plans

Typical examples of this type of investment include monthly payment into an investment or unit trust. The money is pooled together with that paid in by other investors and invested in a fund suited to your personal risk profile and objectives. Returns on these types of plans are subject to tax.

4 Investment bonds

A lump sum can be contributed to a bond contract, which will be invested in funds suitable to the investor's profile. It is possible to draw a tax- deferred income from this type of fund, equating to 5 per cent of the original capital invested each year. This allowance is cumulative, which means larger lump sums can be withdrawn at a later date without creating a tax liability. On full encashment of the plan any gains may be taxable.

5 Investment portfolios

An equity-based portfolio could be arranged by an independent financial adviser to suit your individual needs and objectives, The portfolio can grow when income is not an issue and a restructure of investments can take place when income is required. Any gains or income from the portfolio are subject to tax.

6 Child trust funds

CTFs were introduced for children who were born on or after 1 September 2002 but time is running out to take advantage as they are being withdrawn in January. Since 2005 parents have been given a 250 voucher to invest in a nominated account on the birth of their child, with an additional contribution made at age seven. The initial payment has now been reduced to 50 and the additional payment will cease for children born after 31 July 2010. Family and friends can still invest an additional 1,200 a year into a CTF, with the returns being tax free and paid to the child at age 18, but children born from January 2011 will not qualify for a CTF.

7 Pension funds

Retirement benefits can be taken from personal pension plans between the ages of 55 and 75.It may be possible to use the tax-free lump sum of up to 25 per cent of the accrued fund to help fund children at university. This can be done tax efficiently to ensure the parent doesn't face an additional tax burden.

8 Kids' accounts

Children are able to have their own cash deposits, but if the interest generated on the amounts gifted by parents exceeds 100 then the interest is deemed to be that of the parent and taxed on their income. Children do pay tax on their income but, like adults, have an annual individual allowance (currently 6,475) before being liable for tax.

9 Student loans

It may be that there is no option but to use a loan while the child is at university to help fund any tuition fees and living costs. A tuition fee loan is available and is paid direct to the university; this loan is not affected by overall household income. Student loans are not repaid until the child has left university and is earning in excess of 15,000 a year.

10 Buying a home

With 100 per cent mortgages a thing of the past and lenders demanding increasingly big deposits it makes sense for your child, or children, to invest any spare capital in a decent instant access savings account that offers a competitive rate of interest. Most mortgage companies will offer 80 to 90 per cent loan-to-value mortgages to first-time buyers, but with all the other costs involved, such as legal fees, getting on the property ladder can be very difficult for first-time buyers and parents and grandparents are increasingly helping them out with the much-needed deposit, or alternatively acting as guarantors.