Adult kids living at home – how it can impact your finances.
We all want the best for our kids. But with many adult children living at home longer, the cost for parents often impacts retirement savings. If you’re in this situation, there are some strategies you can put into place.
Rising housing costs, a changing job market, the increasing costs of study, and the fact that young people are waiting until later in life to get married and have children are all factors that are contributing to the rising number of children living in the family home with Mum and Dad well into their 20s and 30s.
The 2016 Australian Census put the figure of adult children aged 25-34 living at home at almost 400,000. An increase of 20% on figures five years earlier.
The financial burden on parents.
The trend looks set to continue in Australia and while most parents don’t think twice about the opportunity to help their kids – to get through university a little easier, or live cheaply for a few years to save for a home, there are costs – both to lifestyle and savings.
Let’s take the example of Anthony and Julie – both in their late 50s with two daughters aged in their 20s living at home. One daughter is studying a double-degree. The other working as a junior in a local law firm. Neither has yet achieved an income level high enough to strike out on their own. And while Anthony and Julie are happy to help, they do insist that the girls pay board. But the money the girls both contribute to the household doesn’t come close to covering expenses, particularly with costs of basic living – electricity, gas, food – all increasing.
Usually, the financial impact of adult children living at home, paying minimal rent, is not felt immediately. But over time, the continual added burden can affect retirement savings and a lot of people find themselves working longer. Or they make the decision to put off selling the family home, which is often the most valuable asset most couples close to retirement age have.
How to keep your retirement dreams intact
There’s no reason why parents can’t help their kids by letting them stay at home into their 20s and even their 30s, and at the same time, keep their retirement plans on track.
It’s a simple case of understanding exactly what your financial position is, and how much you need to retire. Then it’s case of putting a good plan into place that you can commit to, as well as ensure you’re not over-stretching yourself.
There are a number of ways that a financial planner can assist you – options are varied, and a planner will help you work through a personalised strategy and make key decisions. When you understand how you’re spending your money, you can identify sensible savings and then make those savings work for you. It’s a good idea to make sure that you have the right wealth protection mechanisms in place too.
If you have young children – prepare yourself early!
If you have young children, it’s a great idea to talk to a financial planner about getting them started into a long-term savings plan now, long before they actually need significant sums of money. Something like a managed fund allows you to get started with just a couple of thousand dollars and make regular payments over time – small, regular contributions will grow. That way, when you’re children are approaching adulthood and needing a house deposit or money for university, they will already have a nest egg they can tap into.
This is general advice and should not be treated as personal advice.
Jason Rapley is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.
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