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teenager and dog playing
Your kids want to grow up and learn how to be independent; but living off the folks isn’t independent. So whats the financial risk for multi-generational homes?

Do you still have Adult Children living at home?

It might be cultural, it might be essential, but it shouldn't put your ability to retire at risk.

If you have Adult Children still living at home with you while you’re getting ready to retire, have you ever thought about how much money that costs and the effect it will have on your retirement savings?

Read in this article

The new state of the nation

Welcome to the new normal for many Australian families who have their now-adult children still living with them in the family home. In fact, a 2016 study showed 43% of 20–24 year-olds were still living in the family home.

If you do have adult children still living at home, don’t fret; there are ways to encourage sensible financial habits in your now-adult kids, without neglecting your own pre-retirement planning at the same time.

The unintended cost of your adult children living at home with you

Are you among the two-thirds of parents over 50 who admit to regularly financially supporting their adult children in the last 5 years?

The average amount of financial help provided is about $6,800 per year and is more than the average additional contribution made into most individuals super funds.

More than simply small change, this same amount of money could make a sizable difference if put into a high-interest savings account or super fund for your retirement each year.

So what can an extra $100 per week spent on the kids really cost you?

  • $100 a week becomes $5,200 a year.
    • When earning 5% and compounding annually over 10 years it becomes $15,256
  • $150 a week becomes $7,800 a year.
    • When earning 5% and compounding annually over 10 years it becomes $98,108
  • $200 a week becomes $10,400 a year.
    • When earning 5% and compounding annually over 10 years it becomes $130,810

Are you a little surprised about the results? Here’s the Gocvernments calculator to see for yourself.

The importance of understanding the first things first.

We all have to live within our means and we’re all facing the economic reality of what does a comfortable retirement actually cost?

  • It’s vital you don’t sacrifice the stability of your own retirement while looking after your adult children.
  • This is key for your financial future as well as the health of your relationships with your children.

If you don’t, you risk resenting your children for your lower quality of living in retirement and they will resent you for not having the conversation with them about that too. Your grown children’s financial expenses should not be your responsibility to bear. (You may even risk passing on the same cycle of dysfunction to your children.)

Have a conversation and explain you’re responsible for your retirement first and they’re responsible for their financial position first too.

We’ve worked out how to find a way to make it work for all of us, but it means we’ve had to sets standards and be clear on our shared expectations - and our adult daughters have had to choose to buy into that. We’ve decided to live together as a family of adults, not as ‘adults with adult boarders in a share house’. - Elizabeth - mother of 2 adult daughters still living at home

It may not matter so much where they live, as long as they’re living financially independent lives - John - father of 2 adults sons still living at home

Still at home or returning home?

We make a distinction between adult children still living at home and those adult children that return home after a time of living away independently.

  • While initially similar, our experience has been, that learning what it’s like to live independently outside the family home with others creates a different level of understanding and (hopefully) a new appreciation of the level of opportunity living at home can bring.

That said, we also have clients whose adult children have remained in the family home and successfully transitioned into a multi-generational home where all members care and contribute to the home and each other, according to their abilities.

As many reasons as there are households

The reasons why young adult children still live in the family home are many but primarily relate to the cost of living and delaying relationships.

  • High cost of home ownership - is changing the expectations and delaying the plans of many people.
  • Delaying long-term relationships - many young Australians are delaying getting married or partnering up till later in life. Many are not even getting their driver’s license until ‘it's needed’ rather than ASAP as a traditional rite of passage into adulthood and independence.

Two suggestions to keep you going

For many of us, the apparent sudden arrival into adulthood surprises all concerned. And not all adult children automatically acquire the same insights and level of personal responsibility as we’d like.

So what are some ways parents with adult children are managing the transition in expectations, responsibilities and even finances when their now-adult children are still living at home?

Here are some real-life examples of how our clients have approached this part of their life.

1. Be open and honest about your own financial goals and plans

Leanne has her two, now-adult daughters living with her.

With age comes a little more wisdom so conversations about day-to-day expectations and the bigger longer term picture has become a regular part of their life and conversations.

Over a course of three weeks and three family dinners, she explained to her daughters,

my plan is to try and pay down the debt on my home loan quicker because I have a 30 year loan and only 18 years until I retire and I cannot waste my super to pay off a mortgage debt’ - Leanne aged 47

Together they determined her adult daughter’s financial goals, while they continued to live at home, should include;

  • Saving an emergency fund of at least three (3) months rental and living expenses (later increased to 6 months).
  • Paying off car loans early within three years (a year earlier than required so the skill of budgeting for extra repayments became a normal expected part of financial life)
  • Requiring her daughters to have Income Protection insurance in place. If they didn’t have some level of income insurance in place, the amount of board paid would have to be increased to reflect the increased risk taken on by Leanne and help offset the additional risks to the home should either of them get seriously sick or disabled and need long term care,

A great help to this process was getting used to writing their short, medium and longer-term goals down.

Sapience Quick Family Financial Goals checklist

2. Know why your young adult is still living at home

As parents, our hope is our children will learn how to live independently in the world and how to more than just financially survive from paycheque to paycheque.

If your adult child is still living at home for a particular reason, name that reason and add an initial timeline to it with a commitment to review and reconsider the progress in 12 or 24 months.

This can help them live this part of their lives more purposefully.

The financial habits your child develops can last a lifetime and they have a great opportunity to learn great ones while still living at home.

A plan without a timeline risks becoming just a wish.

Reason #1 Being able to save a deposit for a house quicker

For some parents, charging kids rent feels self-defeating because it’ll take them longer to save a deposit to buy their own place and move out.

That said, charging them rent and keeping it as a ‘surprise deposit gift’ for a home later - sounds great; but they don’t actually learn

  • There is no wrong or right way. You’ll just have to consider what’s best for your adult child
  • If it’s a secondary goal to Uber Eats being delivered every day and the saving is only ‘whatever is left' is put towards a deposit for a home, you may find yourself being more an enabler of bad spending habits that could leave them crippled later.
  • Socking away only the spare change when all is done, may be something - other than saving.

Pro Tip: If it’s saving for a house, what does ‘saving look like?’

Reason #2 Being able to pay down education debt.

As of April 2016, the amount of money owed to the Australian government under the higher education contribution scheme (HECS) was AUD$60 billion and is expected to increase to $180 billion by 2026. Living with education-driven debt is a new burden for many young adults now.

Reason #3 Being able to buy a car, save a rental bond or saving security deposits to use to connect utilities.

Pro Tip: If you are charging reduced rent or board (or feel you don’t need the money), agree on what you will subsidise and why, and what you will not subsidise and why.

You may charge reduced rent on the condition they do a particular task or pay down personal debts. Either way, consider making that known.

Joanne charges her now-adult son Julian reduced rent on the condition he does all the family dishes after every meal (without attitude) and because he is enrolled in study and passing his exams. That means if he doesn’t pass an exam or abandons his study, their agreement is suspended.

Jacinta doesn’t charge her adult sons rent as they both pay their own way with food and utilities, actively run chores for her as required, (without attitude) and actively support the family and reduce the pressure on her as a single mum running a small business.

The conversation that has to happen

If you have teenage children approaching adulthood sooner rather than later, it’s probably time to seed the idea of growing responsibility and how that expectation may change when they reach a certain age eg: 18, or 21 or 25, etc - depending upon your plans and the maturity level of your child.

  • Your kids want to be independent. But living off mum and dad isn’t independent.

Helping your now-adult children transitioning to greater financial responsibility and awareness is a challenge for every parent. And it's made easier with regular open conversations about your plans, your goals for your future, and taking an interest in theirs too.


author pic drew browneDrew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses.  He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.

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