A significant number of young adults are finding themselves living with their parents well into their twenties, a trend driven by economic factors 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, equating to nearly five million people. This situation is prompting parents to consider how to manage their adult children living at home, including discussions about rent and financial independence.
The Financial Impact of Adult Children at Home
For parents, having an adult child return to the family home can incur additional costs. Wealth manager Quilter estimates that supporting an adult child living at home adds approximately £3,246 annually to household expenses. This includes an increase of about £2,421 for food, encompassing groceries, takeaways, and dining out. Water bills can rise by an average of £156 per year with an additional person, and energy costs may increase by £669 annually, pushing a household from medium to high energy usage.
Over the long term, these costs can be substantial. If a child lives at home from age 18 to 34, the cumulative additional cost to parents could reach £55,187.
Initiating the Conversation About Independence
Addressing the topic of adult children moving out can be delicate. Financial coach Catherine Morgan advises that these conversations should ideally begin well in advance of the need for them to avoid surprises. She suggests choosing a relaxed time, such as over dinner on a weekend, to discuss finances and future plans. The discussion can involve assessing the child's readiness to move out and outlining steps to achieve this goal.
Saving for a deposit is crucial for renting or buying a property. Financial tools like Individual Savings Accounts (ISAs) allow individuals to save up to £20,000 annually tax-free. Lifetime ISAs offer an additional government top-up of 25% for those saving for a first home, up to an annual limit of £4,000. While stocks and shares ISAs can offer higher long-term returns, they are generally recommended for funds not needed for at least five years.
Strategies for Encouraging Independence
For parents who wish for their children to become independent, a structured plan is often more effective than ultimatums. Financial broker Nicholas Mendes highlights that successful transitions typically involve a family-agreed plan set six to 12 months in advance. He notes that parents should redirect financial support towards deposits or mortgage structures rather than indefinite support.
Some young adults who are natural savers may still hesitate to move out, citing unfavorable market conditions. In such cases, Morgan suggests encouraging them by framing their progress positively, such as suggesting a specific date for viewing properties or noting how close they might be to their savings goals. If parents have financially stable circumstances, charging rent might not be necessary if the child is actively saving. However, adding rent for a child who is already making an effort to save could be counterproductive.
The Role of Rent and Financial Support
For adult children who are reluctant to leave home, charging rent can provide the necessary incentive. A moderate rent, such as £300 per month, might be perceived as a worthwhile cost for personal space and independence compared to the higher cost of renting a room in a shared house. Charging market-rate rent for those in well-paying jobs could further encourage them to seek their own accommodation. Some parents opt to save the rent collected on behalf of their child, to be given to them when they are ready to move out. However, experts caution that charging rent without a clear plan can lead to resentment.
In situations where buying a home in expensive areas like London or the South East is the goal, parents might consider financial gifts for a deposit. The average deposit for a first-time buyer in England is substantial, making parental contributions common. It's important for such financial assistance to be structured as a gift rather than a loan, as loans can impact a child's borrowing capacity. Lenders typically require confirmation that the money is a gift with no expectation of repayment.
Some financial advisors express concern that gifted deposits may diminish a young adult's sense of financial accountability and resilience.
Co-signing Mortgages and Shared Experiences
Parents might also assist by joining their child's mortgage, particularly if the child has a deposit but insufficient income for lender affordability assessments. A common method is a joint buyer, sole proprietor (JBSP) mortgage, where the parent's income is considered. This can significantly increase borrowing power but carries risks, as parents become liable for payments if the child defaults, without gaining ownership. Legal advice and a clear exit strategy are essential in such arrangements.
Personal accounts highlight various approaches. One family charges their 22-year-old daughter £200 per month, which she pays via standing order. This covers rent and meals, teaching her budgeting skills while leaving her with funds for enjoyment and savings. Other parents have successfully encouraged their adult children to save for homeownership by charging rent and encouraging savings plans, with adult sons eventually buying their own homes after contributing financially while living at home.