A balance of independence and support
Over the past decade, the number of adult children living at home has significantly increased. A recent study revealed that the number of families in England and Wales with adult children living with their parents rose by 13.6% between 2011 and 2021. The study also stated that this appears to be a continuing trend.
Several economic factors contribute to this scenario – such as rising house prices, inflation, instability in the rental market, unemployment and the increasing cost of living. Regardless of the reason, it’s essential for parents to consider how they can support adult children living at home, whilst ensuring their own financial plan is still on track.
In this article, we offer advice to both parents and adult children on managing finances whilst living together in the family home.
Have open conversations about money
Financial education is a crucial life skill to learn, but is often missing in the school curriculum. Having open conversations about money with your children, from an early age and into adulthood, is beneficial for their own financial independence. A financial planner can support this ongoing education, helping both you and your children navigate financial matters throughout life.
Family discussions about finances can lead to agreements that prepare both you and your children for financial responsibility. This may include conversations around your commitment to gifting, trusts, or an early inheritance.
Contributions to household expenses
Encouraging your adult children to contribute to household expenses can benefit your finances, and the responsibility can help them to become more financially independent. This allows them to manage outgoings, budget, save, and understand the cost of living – all of which will be invaluable when they eventually live independently.
Contributions might include payments towards food, bills, or even your mortgage, commonly known as “paying board.”
Establishing financial goals
A financial planner can assist you and your family in setting your financial goals and creating a plan to achieve them. Discussing and identifying your adult children’s aspirations can help to create a clearer picture of their future.
Introducing your children to cashflow modelling can be an essential step in developing their financial literacy. It can introduce them to financial concepts like saving and investing, and can help them to understand what is required in order to achieve their goals in the future.
Impact on your financial plan
Being able to financially support adult children during a time when they may need it most is a responsibility many parents feel passionately about. However, it’s vital that you consider how this support may impact your own financial goals and what you may need to do to adapt.
Effective management of your finances, combined with professional guidance, can allow you to support your family without significantly altering your overall plan.
You may choose to reduce your children’s contributions to household expenses, allowing them to save for their own home. If so, you might need to adjust your outgoings, regularly assessing how this impacts your income and expenditure.
If you have savings set aside for such situations, be mindful of how using these funds might affect your own goals such as holidays, travel, home renovations, or early retirement. It is a natural instinct of parents to put the needs of their children ahead of their own, but care must be taken to ensure both parties needs are considered.
Trusts and inheritance
It’s possible to use a trust or inheritance you have saved for your children to help with significant milestones, such as purchasing a home. Now might be the right time, particularly if they are at an age where they can responsibly manage this inheritance. Deciding the appropriate age for an early inheritance can be challenging and is a topic we’ve addressed in a previous article.
Another option is providing a financial gift to help your children or grandchildren get a head start. However, be aware of inheritance tax (IHT) implications, and consult with your financial planner to ensure affordability before discussing this with your children. Gathering the financial facts first helps manage expectations if the gift ends up being smaller than initially anticipated.
How we can help
We believe family conversations mediated by expert advisers are an essential way to keep your children informed about your financial plan and the level of support you can provide. This transparency can help them make their own financial plans more effectively.
A financial planner can facilitate these often-challenging family discussions and provide advice to your children on managing their finances if needed. We can help determine the amount of financial support required to ensure both your children’s independence and the integrity of your own financial plan are supported.
Contact us to speak with our team of experienced financial planners.
Important Note
The information contained within this document is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
This article is distributed for educational purposes only and should not be considered financial advice.
If you are unsure about the suitability or otherwise of any product or service, we recommend that you seek professional advice.
The opinions stated in this document are those of the author and do not necessarily represent the view of Progeny and should not be relied upon to make a financial decision.
Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
If you are unsure about the suitability or otherwise of any product or service, we recommend that you seek professional advice.
Tax treatment depends upon individual circumstances and is based on current UK tax legislation, that is subject to change at any time.
