Parents Prioritize Children's Homeownership, Saving for Down Payments Early

Many parents are now prioritizing saving for their children's first home down payments over traditional college funds, with a significant portion beginning these savings before their children even start elementary school. A report by Coldwell Banker Real Estate, based on a Harris Poll survey of 2,060 U.S. adults, found that 82 percent of parents with children aged five and under have considered or are already saving for their offspring's future down payment.

This trend is particularly pronounced among younger generations, with 85 percent of Gen Z parents and 82 percent of millennial parents either considering or actively saving for a child's down payment. This compares to 70 percent of Gen X parents and 51 percent of baby boomer parents, suggesting that those who have experienced the current housing market are more motivated to provide a financial head start for their children.

Across all generations, 56 percent of parents have considered contributing to their child's first property, surpassing savings for college (51 percent) and a first car (49 percent). Mary Lee Blaylock, president of Coldwell Banker Affiliates, noted that families are increasingly pooling resources to help younger generations achieve the financial security associated with homeownership, a goal that remains central to the American Dream for 85 percent of those surveyed. She added that owning property provides a sense of security that renting cannot match.

The growing emphasis on early savings also underscores the increasing difficulty of entering the housing market. According to David Fisher, founder and chief executive of Summit Income Planning Group, home prices have escalated at a rate far exceeding wage growth, potentially extending the time it takes for individuals to save for a down payment. Starting a savings fund at birth allows more time for investments to grow before children are old enough to save for themselves.

However, financial experts caution that a substantial down payment alone does not guarantee affordability. Blaylock emphasized that buyers must still be able to manage mortgage payments and other associated costs, and that parental contributions should supplement, not replace, personal savings.

Choosing the right savings vehicle is another key consideration. Options include high-yield savings accounts, custodial accounts, and investment accounts held in a parent's name. For those with shorter timelines, a high-yield savings account might be suitable, while longer-term goals could favor investment accounts. However, custodial accounts transfer legal ownership to the child upon reaching the age of majority, typically 18 to 21. Parents seeking to retain control may opt for an investment account in their own name, though they must carefully consider tax implications and investment risks.

The desire for homeownership extends to young adults, with 92 percent of Gen Z individuals who do not currently own a home expressing a desire to buy one. For some, the aspiration is so strong that 28 percent would prioritize their ideal home over their dream job, and 25 percent over finding a romantic partner. Nearly three-quarters of those in their 20s view homeownership as a marker of financial security.

Family assistance is already playing a role in home purchases. Fifteen percent of current homeowners reported receiving financial help from relatives or friends for a down payment, a figure that rises to 26 percent among Gen Z homeowners. It is noteworthy that approximately 71 percent of those who received family assistance are expected to repay the funds, indicating that the 'family bank' is often structured as a loan rather than a gift, transforming the American Dream into a multigenerational financial project.