Chances are, not many young adults – or their parents for that matter – expected they would still be living in the family home well into their 20s and 30s, but it’s a reality for many people these days.
Today, nearly a million more 20-34-year-olds across the UK live with their parents than two decades ago, analysis from think-tank Civitas recently found. Some may have never moved out, while others may have “boomeranged” back after university or a relationship break-up a little later on, or in order to save for their own home.
But while finances – and the chance to save – are often a key reason for adult children living at home, it’s important to be upfront and open about expectations and ground rules on the money front. This can protect and benefit both parties, and help avoid any conflict flaring up.
Are you a boomerang child living back at home – or the parent of one? Here are some tips for both generations on navigating the money issues…
Tips for adult children
Some young adults may have moved back home to give themselves “breathing space” to get their finances back on track. But research suggests parents are often left in the dark. Charter Savings Bank found that while nearly 70% of parents say they are open about their finances with their children, nearly half (45%) of 20-34-year-olds have either debts, savings accounts, or both, that their parents are unaware of.
Being honest could also help to avoid rows when parents ask for household bill contributions.
If your goal is to buy a place of your own, there may be some innovative mortgage deals which could help.
There is strong competition among mortgage lenders to attract first-time buyers. Research carried out by Moneyfacts.co.uk in early February found that people with a 5% deposit looking for a two-year fixed mortgage rate will find the typical rate on the market has seen a significant 0.54% fall since last August – from 3.95% to 3.41%.
In January, Lloyds Bank launched a deal to help first-time buyers without needing a deposit – as parents put cash into a savings account instead. Consider Government-backed schemes, such as the Help to Buy ISA. For every £200 you save, you can receive a bonus of £50. The Lifetime ISA, which can be opened by those aged 18-39, also helps people save for their first home or their retirement in the same pot.
Tips for parents
Nearly half (47%) of parents don’t charge their adult children rent for living with them, and for those who do, the average is just £161 a month, according to Charter Savings Bank’s research. Some parents ask for money towards food (31%), energy bills (23%), phone and broadband (17%), for example, but a third (33%) don’t ask for any contribution.
Try to agree a fair amount for adult children to contribute to the running of the house, bearing in mind some may also be struggling with debts to pay off, and unpredictable incomes if they’re just starting their career.
Be clear when offering financial help to children. Is it a loan, or is it a gift? And don’t forget about your finances. It’s natural to want to give your children a helping hand, but don’t neglect your own finances. Make sure your plans for retirement and paying off the mortgage, for example, are on track.