Can you afford for your adult kids to live at home?

3 min read

Parents with adult children still living at home have the best of intentions to help their kids get ahead, but they might be putting their own financial futures at risk.

At the time of the 2016 census, almost 400,000 non-dependent children aged 25 to 34 were living at home1, an increase of 20 percent from five years earlier.2

Why the increase?

Record high levels of house prices and rents3 and a challenging job market4 are two factors keeping kids in the parental home longer. Also contributing are the trends for young people to participate more in higher education, marry and have children later.5

23-year-old Sydneysider, Joel Taylor moved out to rent with a friend when he was 21 but when his lease was up he returned home where his rent and board amounted to just $400 per month. According to his father, Dave Taylor, 54, managing director of a branding and design business, “Joel persuaded us to put up with him again so he could pay a minimal weekly amount and bank most of his wages – then go off and travel.”

“Joel had a year of understanding what happens to your money if you live independently – it goes on bills, on the accommodation and there’s nothing left for travel adventures,” Dave says.

Kids paying their way

Gold Coast solicitor, Ashley Bennett and his retail merchandiser wife, Julie have two daughters, Hayley, 24 and Lauren, 22. Both daughters have paid around $100 per week board since they left school and started in their first jobs. In the past, when Hayley’s boyfriend lived in the Bennett home, he paid board as well.

Early in 2017 Hayley left home, but Lauren, a university student who works part-time, still lives with her parents.

Though $100 is more than some of their friends pay for rent and board, the money doesn’t come close to covering expenses. “My favourite saying is that $100 pays for them to park their car in the driveway,” Ashley says. “It’s $1,000 a week to keep the doors open at my place – $100 is a drop in the ocean.”

Dave Taylor has noticed the impact on his water, gas and electricity bills with Joel back in the home: “Even the shopping – it’s incremental, it’s so many little things that you don’t really notice creeping up on you, but then when you sit back and look at the accumulation of cost, you do go ‘wow’.”

The burden for parents

Though they get along well as a family, Julie Bennett says her girls have never really pulled their weight around the house. Often Julie says it’s easier to “not sweat the small stuff” and do household chores herself instead of nagging.

On top of the increased burden of home duties, there can also be an impact on parents’ accumulation of retirement wealth.6 “You’re subsidising them, there’s no two ways about it,” Ashley Bennett says. “I don’t think about it much, but I have no doubt it will affect the money we have to retire on. Every cent you’re giving up is money you don’t have for later.”

Nibbling away at your retirement

While Dave Taylor loves having his son at home, he’s occasionally tempted to ask Joel for the rent he’d actually be paying for the kind of property they live in. “And then that money could go towards superannuation or paying the mortgage off sooner,” Dave says. Or it might even help him and his wife retire earlier.

“But then this other bit kicks in which is the paternal instinct and you go, he’s my kid and I want the best for him,” says Dave.

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, prepare for their retirement. 

It’s just a matter of having a plan in place that ensures you’re not overstretching yourself.  A good first step is to see an experienced financial adviser.

Trying to figure out how you can support your kids while still protecting your nest egg? Contact us to arrange to speak to a BT adviser.

1. Australian Bureau of Statistics, 2016 Census Community Profiles. A ‘non-dependent child’ refers to a natural, adopted, step or foster child of a couple or lone parent usually resident in the household, who is aged 15 years and over and is not a full-time student aged 15-24 years, and who has no identified partner or child of his/her own usually resident in the household.
2. Australian Bureau of Statistics, 2011 Census Community Profiles.
3. Parliamentary Briefing,  Housing Affordability.
4. Parliamentary Briefing, Employment – Measuring and improving outcomes for young Australians.
5. Australian Bureau of Statistics, Australian Social Trends, Young adults: then and now – April 2013.
6. Australian Bureau of Statistics, Home and Away: The Living Arrangements of Young People – June 2009.

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This information is current as at 11 August 2017. Some names have been changed in this article for privacy reasons.

This information has been prepared without taking account of your personal objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

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Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investment held in superannuation. The Government has set caps on the amount of money that you can add to superannuation each year on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps. For more detail, speak with a financial adviser or visit the ATO website. 

© BT Financial Group 2017.