Home to roost: Advice for parents with adult kids living at home

Money & Life
(Financial Planning Association of Australia)

Do you have adult children living with you? Thanks to housing affordability and stagnant wage growth, more kids are relying on Mum and Dad to keep a roof over their head well into their 20s and 30s. Get some advice on how to foster financial independence in your kids, so they'll be ready to stand on their own two feet when they leave the nest at last.

The stats are in Gens Y and Z are staying home with their parents for longer. Looking at results from both the 2011 and 2016 census from the Australian Bureau of Statistics (ABS) we see a 2% jump in the number of 18-24 year olds living at home, up from 41.4% in 2011 to 43.4% in 2016[1]. The rise in the number of 24-year olds still in the nest is even higher, up 3% during the five-year period[2]. This means nearly a third of 24 year-olds are still not ready to go it alone. The number drops to one in five of all Australian households continuing to have least one adult sharing a home with one or both of their parents[3].

Financial factors driving "Failure to Launch"

While there could be many reasons for adult children and parents choosing to stay under the same roof, the consensus seems to be that it's usually a financial decision. Over in the UK, where the number of young adults living at home is at its highest since 1996, the trend is seen by researchers as "a family response to high unemployment rates, poor job prospects and financial hardship among young adults[4]."

Here in Australia, it's thought that the persistent economic issues young people are facing, like housing affordability and sluggish growth in wages are more likely to be driving our own wave of 'failure to launch'households. On the other hand the ABS also points to a more general "delay in a range of life events" including tying the knot and starting a family[5]. There's also been a surge in numbers of both undergraduate and postgraduate university students in recent times[6]. With HECS debts looming when they move on to full-time work, many of these students could be expected to live with parents to save on living costs while they can.

A boom in Boomerangs?

With the rise in postgraduate enrolments being particularly steep in the last decade a 123% increase since 2006[7] it's possible that the growing 'Boomerang'kids phenomenon could be down to the need for Generations Y and Z to return to the family home so they can afford to invest in their future career. According to figures from the 2018 Deloitte Millennial Survey, 36% of millennials and 29% of Gen Z don't believe they have what it takes to thrive[8] in future workplaces where disruption by automation, data and technology will be the new norm.
Unlike the Failure to Launch category, Boomerangs are the young adults who've flown the nest, only to return later. Described by Dr. Edgar Lui, multi-generational living expert at UNSW, as "unable to sustain independent living", these adult children often come back following a spell studying or travelling, when a relationship ends or they're between jobs[9]. While Dr Liu acknowledges that not all multi-generational households choose this way of living for financial reasons, it's likely that a child who's paying their way through uni (again), experiencing the financial fall-out of divorce or is unemployed, will be struggling with their finances.

Paying their way to financial independence

Although supporting your kids during hard times might be second nature for you as a parent, it's very important to foster financial independence in your kids, whether they're living with you or not. Children can come to expect handouts from their parents and spend accordingly, even after they've struck out on their own. This is one of the reasons why journalist and self-confessed member of the Boomerang club, Natalie Reilly, encourages parents to charge offspring rent and board when they're continuing to live with them. "It boosts independence, financial responsibility and self-esteem," saysNatalie. She also hints at how important it is for young people to prepare themselves for the possibility of becoming the main provider in the household one day. "Before you know it, you'll have a house of your own with a partner and children and you'll be wishing you paid a teeny $100 a week," she says.

It's advice that CERTIFIED FINANCIAL PLANNER® professional Jeremy Chiel of Stonehouse Group agrees with. He believes it's a step in the right direction to get young people in the habit of budgeting and saving to prepare them for a time when they'll be paying their own way. "If you can learn to appreciate the advantages of saving early, you're getting in a habit that can help you enjoy a comfortable lifestyle, whether you rent for a lifetime or buy,"says Jeremy.

A home of their own?

Jeremy raises an important issue here that's close to the hearts of many Australians and their kids. The great Aussie dream of living in your own home is still popular, so should children expect to stay with you rent-free so they can save their entire deposit? Or should you dip into your super or use equity in your own property as security for their first home? This is a very personal choice, of course, but it's important to remember young people can often benefit from a spell renting or living in a share house. It's an opportunity to build on their budgeting skills before making that big commitment to a mortgage, and gives them the flexibility they might need to go where the jobs are.

Make it work for everyone

Even if you come to a friendly agreement about finances, even the most harmonious families can expect a few tensions when adults kids stick around. According to Dr. Lui, privacy is considered to be the biggest disadvantage of multi-generational living for all parties involved[10]. So staying aware of each other's need for space and boundaries could be an important way for both generations to enjoy co-habiting for longer.

Returning to Natalie Reilly's point about raising adult kids to be independent and confident, making sure everyone is doing their bit for the household financially and practically could be a positive for their self-esteem. According to the Australian Unity Wellbeing Index for 2016, younger Australians are among the happiest in the country, with a notable exception. Young adults still living at home report the lowest levels of wellbeing 72, compared with a national average of 76.7[11]. Acknowledging that you're all in it together, respecting each other as separate beings, and doing what it takes to prepare kids for a solo flight might just be the answer to a happier household now and a successful future launch for your offspring.

Are your kids staying at home for their uni days or leaving the nest? Get some tips for discussing the money lessons that will matter to them as they start their university studies.

[1] ID, Are children staying at home for longer?, 14 July 2017, "In the 2011 Census, 41.4% of 20-24 year-olds were still living with parents. By 2016, this had risen 2% to 43.4%.
"https://blog.id.com.au/2017/population/population-trends/are-children-staying-at-home-for-longer/

[2] ID, Are children staying at home for longer?, 14 July 2017,"In 2016, 70% of 24-year-olds had left the family home to live independently. However, this is also the age bracket where we saw the biggest change between 2011 and 2016, with a 3% differential.
"https://blog.id.com.au/2017/population/population-trends/are-children-staying-at-home-for-longer/

[3] The New Daily, Boomerang kids and failure-to-launch: The plight of 'generation rent', Isabelle Lane, 6 July 2018, "Dr Lui said one in five Australian households was multigenerational (generally considered to mean one or more adult offspring living with one or more of their parents).
"https://thenewdaily.com.au/money/property/2018/07/06/boomerang-kids-and-failure-to-launch/

[4] London School of Economic and Political Science, Parents' lives made more miserable by boomerang generation, 14 March 2018
"http://www.lse.ac.uk/News/Latest-news-from-LSE/2018/03-March-2018/Boomerang-generation

[5] Domain, Why it's important that adult children living at home pay board, Natalie Reilly, "The ABS points to a "delay in a range of life events" and it's true that we are getting married and having children later. And then there's university attendance, which has boomed in the last 40 years.
"https://www.domain.com.au/living/why-its-important-that-adult-children-living-at-home-pay-board-20170523-gw8nbe/

[6] Universities Australia Data Snapshot 2017, page 21, PROPORTION OF PEOPLE IN AUSTRALIA AGED 25-34 WITH A BACHELOR DEGREE OR HIGHER, up from 27% in 2004 to 37.1% in 2016.

[7] The Australian, Battle for jobs triggers postgraduate surge, 23 October 2017, Tessa Akerman, "Competition in the job market has pushed Australians into further education like never before, with a 46 per cent jump in the number of people with postgraduate degrees over the past five years and a 123 per cent increase since 2006.
"https://www.theaustralian.com.au/higher-education/battle-for-jobs-triggers-postgraduate-surge/news-story/edfa72a58f9fc9283482e7e1fc687be8

[8] The Deloitte Millennial Survey 2018, "Fewer than four in 10 millennials (36 percent) and three in 10 Gen Z currently in work (29 percent) believe they have the skills and knowledge they'll need to thrive.
"https://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html

[9] The New Daily, Boomerang kids and failure-to-launch: The plight of 'generation rent', Isabelle Lane, 6 July 2018"Boomerang kids are the result of an "inability to sustain independent living" for many reasons, Dr Lui said. Reasons include those who return home after relationships break down, to those returning from work, study, or travel overseas.
"https://thenewdaily.com.au/money/property/2018/07/06/boomerang-kids-and-failure-to-launch/

[10] The New Daily, Boomerang kids and failure-to-launch: The plight of 'generation rent',Isabelle Lane, 6 July 2018 "Dr Lui's research found companionship was the most valued aspect of multigenerational living, while a lack of privacy was considered the biggest downside.
"https://thenewdaily.com.au/money/property/2018/07/06/boomerang-kids-and-failure-to-launch/

[11] ABC, Adults living with their parents are Australia's least happy, survey finds, Ange McCormack, 20 December 2016 "Adults still living with their parents had a [wellbeing] score of 72, compared with a national average of 76.7
"http://www.abc.net.au/triplej/programs/hack/living-at-home-with-your-parents/8135918