Millions of young adults are returning to live with their parents, a trend driven by economic challenges such as high housing prices, unemployment, and persistent inflation. Official figures indicate that one in three individuals aged 18 to 34 were living with their parents last year, totaling nearly five million people.
This situation presents financial hurdles for both parents and their adult children. Wealth manager Quilter calculations suggest it costs an additional £3,246 annually for parents to house an adult child, primarily due to increased food, energy, and water consumption. Food costs alone are estimated to rise by £2,421 per year, with energy bills adding an estimated £669.
Navigating conversations about finances and independence with adult children can be challenging. Financial coaches advise initiating these discussions well in advance of any move-out date, during calm periods. These conversations should assess the child's readiness to move out and outline a plan to achieve that goal. Key to this is helping young adults save for a deposit, potentially utilizing tax-efficient savings accounts like Individual Savings Accounts (ISAs) or Lifetime ISAs, which offer government bonuses for first-time buyers.
Financial experts emphasize that successful transitions often involve family-wide plans, typically established six to 12 months in advance, rather than ultimatums. When parents continue to subsidize their children's living expenses indefinitely, it can hinder their progress toward independence. Conversely, if children are actively saving, adding rent can sometimes be counterproductive unless it's part of a structured plan. However, for those reluctant to move, a modest rent can serve as a necessary incentive. Some parents opt to collect rent and put it aside in a savings account for their child's future move.
In some cases, parents may need to provide direct financial assistance, such as gifting money for a deposit, which is a common practice. The average deposit for a first-time buyer in England is substantial, leading over half of new homeowners to receive financial help from family. This support, however, should ideally be a gift rather than a loan, as loans can impact a child's borrowing capacity. Some financial planners caution that gifted deposits can undermine a young adult's development of financial resilience and accountability.
Another avenue for parental support is co-signing a mortgage, often through a Joint Buyer Sole Proprietor (JBSP) arrangement. This allows parents' income to be included in affordability assessments, potentially enabling a child to borrow more. However, this carries significant risk for parents, as they become liable for mortgage payments if their child defaults, without gaining ownership of the property. Legal advice and a clear exit strategy are crucial for such arrangements.
Families face unique situations, with some implementing modest rent structures to encourage financial responsibility. For instance, one family charges their 22-year-old daughter £50 per week, a sum they determined to be enough for her to understand the costs of living while still allowing her disposable income for enjoyment and savings. Others have seen adult children save successfully for homeownership by contributing a set amount each month and covering their own living expenses within the family home.