How to handle money issues when grown-up kids live at home

Chances are, not many young adults – or their parents for that matter – expected they’d still be living in the family home well into their 20s and 30s, but it’s a reality facing an increasing number of people.

Whether you put it down to laziness, housing affordability, lavish lifestyles or wider societal changes, more and more young people are choosing to stay at home and live with their parents in their early adulthood.

Today, almost one in three Australians aged 18 to 34 live in their parents’ home. That’s up from about one in five in the 1970s. And once a young person does leave home, the chance that he or she will return at least once before age 35 is almost one in two.

Some adults may have never moved out, while others may have ‘boomeranged’ back after university or a relationship break-up or to save for their own home rather than pay rent.

Read: Older Aussies working longer as more kids refuse to leave home

But while finances – and the chance to save – are often a key reason for adult children to be living at home, it’s important to be upfront and open about expectations and ground rules on the money front. This can protect and benefit both parties and help avoid conflict flaring up.

If you ‘re the parent of adult children living at home, here are some tips to pass on to them and some for yourself.

Tips for adult children

Be open about your finances
Some young adults may have moved back home to give themselves ‘breathing space’ to get their finances back on track. But research suggests parents are often left in the dark. Charter Savings Bank found that while nearly 70 per cent of parents say they’re open about their finances with their children, nearly half (45 per cent) of 20 to 34-year-olds have either debt, savings accounts, or both, which their parents are unaware of.

While it may be tempting to keep debt a secret, living at home can be an opportunity to work with your parents to clear it. Being open and honest could also help to avoid rows when parents ask for cash towards household bills.

Look for help to get yourself onto the property ladder
If the goal is to buy a place of your own, look out for help schemes such as the First Home Owner Grant (FHOG). The scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme funded by the states and territories and administered under their own legislation.

Under the scheme, a one-off grant is payable to first time home owners that satisfy all the eligibility criteria.

There is typically also strong competition among mortgage lenders to attract first-time buyers.

Read: Are you too critical of your adult children?

Tips for parents
Agree on a fair level of contributions for your adult children to pay
Nearly half (47 per cent) of parents don’t charge their adult children rent for living with them. Some parents ask for contributions towards food (31 per cent), energy bills (23 per cent), phone and broadband (17 per cent), for example, but a third (33 per cent) don’t ask for contributions at all.

Try to agree on a fair amount for adult children to contribute to the running of the house, bearing in mind some may also be struggling with debts to pay off, and unpredictable incomes if they’re just starting their career.

Encourage them to be financially independent
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 journalist 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,” says Ms Reilly. 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 minuscule $100 a week,” she says.

Be clear when offering financial help to children
Is it a loan, or is it a gift? If you’re expecting to get your money back someday, be precise about how and when you expect this to happen, to avoid rows and misunderstandings.

Read: Are you failing your ‘children’ on this front?

Don’t forget about your finances
The parents of many adult children are now in their 50s and 60s – an age when, traditionally, you should be preparing for retirement. Now, Australians over 50 are spending $22 billion a year on their adult children. That money could be going into funding retirements.

It’s natural to want to give your children a helping hand, but don’t neglect your own finances. Make sure your plans for retirement and paying off the mortgage, for example, are on track.

Respect their space
A lack of privacy can be one of the biggest disadvantages to multi-generational living, for everyone involved. Even the most harmonious families can expect a few tensions when adult kids stick around.

Once you’ve come to an agreement about finances, have a chat about personal space and boundaries to ensure you’re all on the same page.

Do you have adult children living at home? How do you make it work for you? Please let us know your thoughts in the comments section below.

– With PA

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