Wealth Check: 'How can I get back on the property ladder?'

Jo Bolton worked as a florist until the birth of her daughter, now four. After her marriage broke up, she sold her property to move closer to her parents, in Buckinghamshire. She has £25,000 left from the sale but this is not enough to buy a new home where she now lives.

Ms Bolton plans to work part-time once her daughter starts school this year. Social Security says that there is not much it can do to help until she has spent most of her lump sum. Her father, Ron Saunders, took redundancy from the film industry in 2002, and also has a lump sum from an inheritance and equity in the family home. He would like to know whether he can help Ms Bolton get back on the property ladder and preserve her capital.

We put their case to Patrick Connolly at John Scott and Partners, Jennifer Storrow at Gee and Company, and Justin Modray at BestInvest.

JO BOLTON, 28, FULL-TIME MOTHER

Salary: Monthly income about £420, including child tax credit, child benefit and voluntary child maintenance.

Debt: None.

Property: Renting a three-bedroom terrace.

Savings: £25,000 in a NatWest Direct savings account and £3,000 in NatWest cash Isa.

Investments: None.

Pension: None.

Monthly outgoings: Bills £150. Rent £725. Shopping £300. Car £115.

INCOME AND OUTGOINGS

Mr Modray points out that, based on her current spending, Ms Bolton will use up her savings in about two years. She could cut out some spending, such as Sky TV and broadband internet, but it would do little to alter the fundamental problem she faces: the gap between her income and spending.

In the short term, Mr Modray says that Ms Bolton could think about moving in with her parents, at least until she can return to work. This would cut her spending to about £500 a month, and could also help with childcare.

Mr Connolly agrees that Ms Bolton needs to cut spending where she can - moving back home might be the best option. She is still likely to need to eat into some of her savings, but by cutting out rent payments she will be in a far better position than she is now.

Ms Storrow says that Ms Bolton must think for the long term, which means finding a job that will allow her to buy a property, run a car and pay for all life's other necessities. Again, living with her parents in the short term will preserve cash.

SAVINGS

Ms Bolton has a fairly substantial cash sum, most of which is currently with NatWest. Ms Storrow says that Ms Bolton's first step should be to switch her cash mini Isa, for example, to Lambeth Building Society, which pays 5.4 per cent.

An internet savings account would also pay more than her current arrangements. Mr Modray points out that Cahoot pays 5.5 per cent gross, for 12 months.

Ms Storrow says that Northern Rock has competitive interest rates on line. Ms Bolton should also make sure she is registered as a non-taxpayer with the Inland Revenue, so she can receive interest gross on her savings until she returns to work.

PROPERTY

Ms Bolton lives in an expensive part of the UK. If, however, it were possible to find a property for about £80,000, she could buy somewhere for cash, albeit with a substantial contribution from her parents, according to Mr Modray.

Doing this, however, would put pressure on her parents' finances. Mr Saunders' pensions will currently produce an income of about £4,500 a year, although he could release about £20,000 in tax-free cash. Of course, Ms Bolton might be in a position to pay her parents back when she starts to earn again, but it is a decision everyone involved will need to consider carefully.

Mr Connolly points out that Ms Bolton will only really be able to arrange a mort gage when she starts to earn again.

RON AND BARBARA SAUNDERS

Ms Bolton's parents currently have a large amount of money on cash deposit. Once the family has come to a decision about how best to help Ms Bolton back onto the property ladder, Mr and Mrs Saunders should look at how their money is invested, and review their pension arrangements. Some of Mr Saunders' investments were good performers, but are no longer holding their own.

In the short term, they should look for a better home for their cash: Scarborough Building Society is one option, paying 5.1 per cent, according to Ms Storrow. Mr Modray recommends Cahoot, paying 5.5 per cent.

Advisers' views are given for guidance only