Parents Are Saving for a Child's Down Payment Before Kindergarten. What Early Planning Means for Families in San Diego and Chicago

Families are starting to save for a first home much earlier. Realtor.com reports that four in five parents with young children are either considering or already saving for their child's future down payment, and they are starting before kindergarten.

That is a big change. A generation ago, a buyer usually pieced together a down payment in their late twenties. Many families now treat it the way they treat college: a long-term goal that grows best when it starts early. The instinct makes sense in San Diego and Chicago, where entry-level prices in desirable neighborhoods have outpaced wage growth for years.

What it means for families planning ahead

Our team sees the result of this planning often. Many first-time buyers in coastal San Diego and in Chicago's close-in neighborhoods arrive with family help. That help might be a gift toward the down payment, a co-signed loan, or a parent buying alongside them. When the help is planned years ahead, the purchase usually goes more smoothly.

A few things are worth knowing long before the money is needed:

• Lenders want a paper trail. Gifted funds usually require a signed gift letter and records showing where the money came from. Large transfers made at the last minute can slow down a loan approval.
• How the money is held matters. A custodial account, a trust, or the parents' own investments each work differently for taxes, control, and timing. Bring in a financial advisor or estate attorney early.
• Property tax rules are local. In California, Proposition 19 narrowed the cases where a home can pass from parent to child without being reassessed. In Cook County and the collar counties, tax bills vary widely by township. Either rule can change whether it makes more sense to give a home or give cash.

What it means for sellers

Family-backed buyers make up a real part of today's buyer pool, especially for condos, townhomes, and starter single-family homes. These buyers often bring larger down payments and stronger offers than their income alone would suggest. Sellers in those price ranges should expect parents at showings, asking questions that sound more like an investment review than a first purchase.

Our take

Saving early is a sensible response to a market where homes have been hard to afford for years. The families who get the most from it pair the savings with a plan. They know which neighborhoods their child might want, what homes there cost today, and how the money will move when the time comes. If your family is planning that far ahead, our team is happy to walk you through what owning a home in San Diego or Chicago looks like today.