All in the family
The trend for adult children to remain in the family home for longer is putting a strain on their parents. But there are ways to make it work for everyone.
If you have a happy marriage and a comfortable home, studies indicate it’s more likely your children will delay moving out.
Well, they’re not silly, are they?
But, confirming the cruel irony of life, the same studies also show that having adult children remain at home can put a strain on parental relationships and finances. So you end up broke and unhappy, then they move out – right?
Well, there is another way. Handled correctly, the arrangement can benefit everyone, and help 20-somethings launch successfully into the world.
Today, about one in four, or 23 per cent of people aged 20- 34 live with their parents, up from about 19 per cent in the late 80s. Interestingly, significantly more men (27 per cent) than women (18 per cent) stay at home into adulthood.1
While some have never moved out, about half have left and returned, earning the tag ‘boomerang kids’. Some are shellshocked at the cost and responsibility of flying the nest, others want to save for a house deposit, and some return after a relationship breakdown.
No matter the reason, there are some basic rules to help minimise ‘boomerangs’ and reduce the impact on your sanity and hip pocket.
Teach your children to read, write and budget
Most would agree it’s never too early to teach your children the value of a dollar. Entertainer Toni Braxton raised eyebrows a couple of years ago when she revealed her primary school-aged children paid rent.
It was a nominal amount of their pocket money, but Braxton explained: “It’s so they can understand that when you get older and have to leave, you have to pay bills. It was a shock to me when I found out I had to pay bills, like, ‘What do you mean rent?’ So I thought I should instil that into my little boys.”
In today’s ‘swipe and go’ credit card age, young children are often unaware money is even changing hands, so it is more important than ever to take the time to explain financial transactions. And while pocket money can be divisive, if it comes with financial responsibility – to make your own decisions about spending/saving – it can be an important learning tool.
Have that hard conversation early
If your adult children decide to stay on after they have finished their study, or if they return to the family home after moving out, it is important to have a frank discussion. This can be hard but it will pay off, in the long run, to set ground rules early.
Experts agree adult children should contribute to the household costs, regardless of your financial situation. So it may be a good idea to research average rents in your suburb and discuss this with your children. Even if you only decide to charge a nominal rent, it is important they acknowledge real world costs. Also, let them see your electricity, rates, grocery and fuel bills and discuss how they will contribute.
If your child is studying or only working part-time, charging them the same amount of rent that’s expected of a full-time worker may not be reasonable or achievable. As a guide, it’s generally recommended to spend no more than 30 per cent of your gross monthly income (before tax) on rent.
If your child is saving to buy a car or a first home deposit, instead of paying the market rent rate, you might consider having them trade off some of the money for extra jobs around the house.
Setting up a direct deposit arrangement for rent payments can also save friction. And if you feel uncomfortable taking money from your children, and can afford the costs of having them under your roof, consider paying their ‘rent’ into a savings account and gifting it to them when they move out.
Accept that your children will struggle…and learn from it
Australian Parents Council Director Ian Dalton told The New Daily last year: “One of the issues we see quite a bit is that too many parents don’t want their kids to struggle.”
Dalton hits on a pivotal issue. Baby boomers recognise it is harder for their children in many ways – higher education now comes with fees, housing costs have soared and the job market is tight. No one likes to see their kids do it tough, but it is possible to ‘help’ your children too much, stunting their independence. Many well-meaning parents subsidise their children’s phones, cars and travel into adulthood.
Allowing your children to make financial mistakes (and learn to live within their means not yours) is part of allowing them to grow.
Financial planners are now advising new parents to plan to support their children into their 20s. Nicknames such as KIPPERS (Kids In Parents Pockets Eroding Retirement Savings) and SLOPS (Singles Living Off Parents) indicate the problem.
This can put an additional financial burden on parents who should be saving for retirement. Financial advisors estimate having an adult child at home can cost anywhere from $10,000 – $24,000 a year depending how much parents subsidise extras, such as cars, phones, travel, entertainment and food.2
Some parents end up curtailing their own travel plans, retiring later or delaying downsizing so they can help their offspring. Discuss your situation with a financial planner. Charging your children as little as $150 a week adds up to nearly $8,000 a year. You could use this to supplement your retirement savings or to pay down your home loan or other debts.
Consider renovating your family home with a long term view
Talk to your mortgage broker about using the equity in your home to upgrade the family home. The extension you might like to build for your boomerang children could end up being your granny flat when it is time for you to pass the family home to the next generation and downsize your own living arrangements.
Try to remember there is an upside
This can be particularly true if your adult child returns with his/her own children in tow. You will in all likelihood be doing some extra babysitting, but embrace the bonds you are building. They could come in handy as you head into the territory where some extra help around your home could be just what you need.
2 Mother Can You Spare a Room?, Grind, Kristen, Wall Street Journal, May 3, 2013.