A growing trend sees young adults, particularly those in their twenties, returning to live with their parents after graduation due to economic pressures such as high housing costs, unemployment, and inflation. Official figures indicate that one in three individuals aged 18 to 34 lived with their parents last year, totaling nearly five million young people. Prime Minister Andy Burnham has recently addressed the issue of young people not in education, employment, or training (NEETs), a group exceeding one million.
Even those securing graduate jobs often find themselves living at home to save money, as the average first-time homebuyer now faces costs of approximately £226,000. While some parents may welcome the company, others find it challenging to adapt to adult children re-entering the household, especially when considering the financial implications.
The Financial Impact on Parents
Wealth manager Quilter calculated that having an adult child living at home incurs an additional annual cost of £3,246. This includes an extra £2,421 for food, encompassing groceries, takeaways, and meals out. Water bills can rise from an average of £832 for a two-person household to £988 with an additional occupant, according to Southern Water data. Energy costs are also expected to increase, with parents potentially spending an extra £669 per year on energy bills due to higher usage.
Over the period from age 18 to 34, the cumulative extra cost of supporting one adult child could reach £55,187. These figures highlight the financial burden placed on parents and the need for proactive financial planning.
Navigating the Conversation
Initiating conversations about moving out can be sensitive. Financial coach Catherine Morgan advises starting these discussions well in advance to avoid surprises. She suggests setting aside relaxed time, such as during a family dinner, to discuss future plans. These conversations should aim to assess the young adult's readiness and outline steps toward independence.
Saving for a deposit to rent or buy a property is a key step. Financial tools like Individual Savings Accounts (ISAs) allow individuals to save up to £20,000 annually, with tax-free interest. Lifetime ISAs offer an additional government bonus of 25% on savings up to £4,000 per year for first-time buyers purchasing properties under £450,000.
Financial broker Nicholas Mendes notes that successful transitions often involve a family-agreed plan with a timeline of six to 12 months, rather than ultimatums. He emphasizes redirecting parental support towards savings or mortgage structures rather than indefinite financial provision.
Encouraging Independence
Experts suggest that young adults may need gentle encouragement to move out, rather than pressure. Phrases like "You're closer than it feels. Shall we put an actual date in to start viewing places?" can be helpful. While charging rent can provide a financial incentive, it may hinder savings if the primary goal is for the child to buy a home.
If a young adult is not keen on moving, introducing rent can be a catalyst. For instance, if a shared house costs £500 per month to rent, charging £300 at home might encourage them to seek their own space. Alternatively, parents can collect rent and set it aside in a savings account to gift to their child when they are ready to move out. Morgan stresses that charging rent works best when part of a clear plan to avoid resentment.
Financial Assistance for Homeownership
Parents may consider assisting their children financially to accelerate their move towards independence. Gifting money for a deposit is common, with the average first-time buyer deposit being £63,855. More than half of first-time buyers receive financial help from family. If a young adult has saved £10,000 towards a £20,000 deposit on a £200,000 home and can save £300 per month, it would take over two and a half years to reach their goal.
It is generally advisable to gift money rather than offer a loan, as loans can impact a child's borrowing capacity by being factored into affordability assessments by lenders. Lenders typically require a letter confirming the gift and waiving any claim to ownership.
Morgan cautions that gifted deposits can reduce accountability and hinder the development of financial resilience in young adults. A more complex option involves parents joining their child's mortgage, often through a Joint Buyer, Sole Proprietor (JBSP) mortgage. This allows the parent's income to be included in the affordability assessment, potentially enabling the child to borrow more. However, this places the parent at risk if the child defaults on payments, and legal advice is crucial. An exit strategy should be agreed upon from the outset.
Parental Experiences
Some families have implemented systems for adult children to contribute financially. Paul O’Brien, for example, asked his 22-year-old daughter to pay £200 per month for rent and meals, which he notes helps her understand living costs while still allowing her to save and enjoy social activities. Other parents have reported similar arrangements, with contributions varying based on the child's income and employment status, leading to successful home purchases.