December 10th, 2020

How the trend of boomerang kids may mean you need to reassess your retirement plans

The trend of ‘boomerang kids’, adult children who move back in with their parents, is on the increase. A recent study by the Standard Life Foundation found that almost two-thirds of single adults aged 20-34 now live with their parents.

While this situation may suit the children, accommodating them can cost parents hundreds of pounds per month and could impact their retirement plans.

If you have a child or grandchild who has moved back in with you, read on to find out how it may mean you need to reassess your retirement plans.

Stagnation in wages and rising housing costs are driving the trend of boomerang kids

An estimated 3.5 million young adults live at home with their parents, a number which is one-third higher than it was ten years ago.

One of the main factors driving this trend is the disparity between the cost of housing and wages. While the cost of housing has risen sharply in recent years, there has not been a corresponding increase in wages. This has meant that many millennials have struggled to build their wealth as living costs eat away at their income.

A 2019 study reported in the Guardian found that the amount that young adults have to spend after paying the cost of housing has decreased by 7% since the turn of the millennium. This has meant that they are less able to build up savings to protect them from financial shocks, such as the coronavirus pandemic.

The coronavirus outbreak, and the subsequent lockdowns, has impacted young people particularly hard financially. According to the Financial Times, around one-third of young adults aged 18-24 lost their jobs or were furloughed due to the pandemic.

Furthermore, the youth unemployment rate from June to August sat at 13.1%, up from 10.8% in the previous year and almost three times the rate for the general population, which is 4.5%.

Each boomerang kid costs their parents around £260 per month

While empty nesters might appreciate having their children back home, especially given the social isolation of the lockdowns, it can also be costly.

The most obvious expense is having an extra mouth to feed, but on top of this, you may need to consider the costs of utilities, such as increased electricity usage to power various devices.

According to a 2019 report by financial services provider OneFamily, the cost of boomerang kids can be as high as £260 per head. This is unwelcome news when many households are finding their finances squeezed by the lockdowns.

Furthermore, the report found that the return of adult children has disrupted many people’s long-term plans. Around half of people surveyed (47%) said they didn’t expect their children to be living with them for so long and that they have had to reassess their plans because of it.

Having your kids return home may require you to have a rethink of your finances, particularly in relation to your retirement.

While £260 per month may not be a back-breaking increase in monthly expenditure, it can add up over the long term, especially if your child’s financial situation requires them to stay with you for several years.

For a start, the extra expense may force you to have to work for longer to build a pension fund that is large enough to provide you with a comfortable lifestyle in retirement.

Another potential issue is that having your adult children return home is that it may mean you have to delay downsizing your house.

According to the OneFamily survey, almost a quarter (24%) of people surveyed said that they have had to delay moving out of a family home due to having adult children still living with them.

Discussing your household budget with your child can help you come to a compromise on rent

If you want to mitigate the effects of boomerang kids on your household finances, the obvious solution is to ask them to pay rent or even just some money towards the household expenses, especially if they are employed.

One problem that many people with boomerang kids face is the conundrum of how much rent to charge, especially since some families still consider it taboo to discuss money.

Charging too little rent can potentially affect your finances to the point of disrupting your retirement plans. On the other hand, charging too much can prevent them from building up enough savings of their own to move out once they are financially secure.

A good way to deal with this issue is to sit down with your child and work out a household budget, highlighting areas which their return has impacted. Using this as a framework, you can work out a level of contribution that will suit both parties.

If you struggle to find a compromise, you may benefit from speaking to a financial adviser who can help you to reorganise your finances to accommodate both parties. This can help to reduce the impact of your returning child on your finances while you help them to build up enough of their own savings to be able to fly the nest.

Get in touch

If the return of an adult child has impacted your finances, we can help. Email or click here to request a call back from one of our advisers.

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