The financial toll on parents of adult children living at home
Whether you put it down to laziness, housing affordability, lavish lifestyles or wider societal changes, today almost one in three people aged 18 to 34 live in the parental home. That’s a figure up from about one in five in the 70s1.
And once a young person does leave home, the chance that they’ll return at least once before age 35 is almost one in two2. For these adult children, this living arrangement comes with a host of benefits, many of them financial – such as rent-free accommodation, bills paid and food provided – and parents are paying up.
But how much exactly? And what is the long-term financial cost of letting your adult children continue to live at home?
Why is it happening?
Broader social and economic shifts have left many young people with few other options. In the past, you left home to move in with partners or get a taste of independence. More of us finished school earlier, fewer went to university, and full-time work began sooner.
With residential property prices now at 4.8 times annual income3, young people are faced with high housing costs, whether they’re looking to rent or buy. And the 21st century job market demands more qualifications and postgraduate study, leaving older graduates with big HECS debts.
Taking a toll on parents
The parents of these children are mostly in their 50s and 60s – an age when, traditionally, you should be preparing for retirement. But now, parents often cover the costs of board, food, utilities and private health insurance for their 20-something kids at home – with Australians over 50 spending $22 billion a year4 on their adult children.
That’s all money parents could be saving. Even if you’re doing it gladly, you may be missing out on opportunities – like selling the family home and downsizing, and investing the money elsewhere.
Instead parents have less disposable income, and might be working longer hours and delaying their retirement plans. And that’s not to mention the fact that adult children are missing out on important financial lessons in budgeting and bill paying.
Transitioning to independence
Young people may not understand the pressures they are placing on their parents. You’re all adults, so have a conversation about it. Explain that you need to think more seriously about saving for retirement, and it’s time or them to take on more responsibility.
If you don’t already, have them pay board and their own share of utilities. You could also set a timeline for moving out, with a six-month deadline that gives them time to establish some savings.
It’s a tough situation. With rising living costs and tough job markets, you might be worried about your children’s ability to pay their own way outside of the home.
But by supporting adult children at home, you may also miss out on opportunities and risk eroding your retirement funds.