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The boomerang generation

Financial writer Kara Gammell looks at how to cope financially when your adult children move back in

Turning 18 may have once symbolised the beginning of adulthood, but now the journey to financial independence is lengthier - and more costly - than parents may have bargained for.

The ‘boomerang generation’ – the term coined for those returning to the family home after only a brief spell away – is growing at a faster rate than ever. According to official figures , more than three million 20-somethings still live in the family home.

What’s more, according to Churchill Home Insurance , over seven million adults have been forced to move back in with their parents following the end of a relationship, as rising rents and hefty mortgage costs mean they cannot afford to go it on their own.

But while adult children are flocking back to the nest, it seems that parents are increasingly covering the cost - to the tune of £1.2bn a year. Research from the Scottish Widows Centre for the Modern Family found that parents with children over 18 still living under their roof are spending £122 a month  on their grown-up children.

Are you jeopardising your future? 

But are parents who are giving their adult kids a helping hand in this way scuppering their retirement plans? With a third not expecting to get back the money they have given, what does this mean for their standard of living in later life?

“If you’re retired and have adult children living at home, you need to think carefully about how you plan your budget and be sure that you’re not sacrificing your own future wellbeing to look after your kids,” says Gareth Smith, retirement solutions manager at Skipton Financial Advisers. 

According to Nationwide Building Society, the average income of someone in their sixties is around £21,000, although two in five earn around £15,000 per year. But after household bills, a third of 60-year olds are left with just £100 a month in disposable income .

So how can you make it work? Is there a way to help your adult children and still have a comfortable retirement?

Set some financial ground rules 

From an emotional position, having your children at home can be a blessing or a curse – but it makes financial sense to be open about how the new set up is going to work.

For instance, it is one thing to support your child while they are studying and skint, but how will you feel about footing the bills once your son or daughter has a career of their own?

Get any adult children to pay their fair share of household bills - it’s good practice for when they move out in the real world

There is a temptation to waive the cost of rent and housekeeping, so kids can save faster for their deposit. But be sure that this will not unduly impact your own financial well-being – perhaps by making sure you have a lifetime cash flow forecast that demonstrates you won’t run out of money in retirement.

While retired parents might want to allow their kids to live rent free, they should certainly make a contribution towards any additional household expenses, especially food, which can get very expensive.

“It’s a good idea to get any adult children living with you to pay their fair share of household bills like food. As well as spreading the cost more equally, it’s good practice for when they move out in the real world,” says Gareth. 

It may help to agree a time limit for the arrangement. By fixing a date – which can always be renegotiated later if needed – you can anticipate the total added expense and be realistic with your budget. 

Cut the apron strings 

And know when to cut financial ties. A recent poll found that kids who have flown the nest still rely on their folks. According to Freesat , one in five parents paid for their grown-up kids’ mobile phone bills and one in ten paid for TV subscriptions and food shopping – long after they have moved out.

The growing trend of children returning home to their parents in their twenties – or continued financial dependence – can derail your last-minute pension savings boost and can result in having to delay when you retire.

For those approaching retirement, it is crucial that you are able to maintain pension contributions as it is a very tax efficient way of saving for the future. 

The time immediately before retirement is a great opportunity to maximise pension saving, as it is often a time when people are earning well and have the lowest expenditure, having repaid mortgages and no longer paying for education. 

If you’re already living on a fixed income, then taking on the extra costs of adult children living at home can prove to be a bridge too far. 

Retiresavvy is brought to you by Skipton Building Society. This article has been commissioned by retiresavvy and any opinions voiced are the author's own. 

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