Advice for boomerang children and their cash-strapped parents

Chances are, not many young adults – or their parents for that matter – expected they’d be living in the family home into their 20s and 30s, but it’s a situation that a growing number of people find themselves in.

Finances  and the chance to save  are often a key reason for adult children living at home. Photograph: PA

Today, nearly a million more 20-34-year-olds across the UK live with their parents than were doing so two decades ago, analysis from think-tank Civitas found. Some may have never moved out, while others may have “boomeranged” back after university or a relationship break-up later on, or to save for their own home rather than pay high rents.

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

Are you a boomerang child or the parent of one? Here are tips for both generations on navigating the money issues.

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 are open about their finances with their children, 45 per cent of 20-34-year-olds have either debts, savings accounts, or both, which their parents are unaware of.

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

There may be deals from mortgage lenders which could help you onto the property ladder

If the goal is to buy a place of your own, there may be some innovative mortgage deals which could help. In some encouraging news for aspiring first-time buyers, mortgage lending figures from UK Finance have shown that, across the UK, more people got on the property ladder in 2018 than in any other year since 2006.

There is strong competition among mortgage lenders to attract first-time buyers. Research by Moneyfacts.co.uk last month found that people with a 5 per cent deposit looking for a two-year fixed mortgage rate will find the typical rate on the market has seen a 0.54 per cent fall since last August – from 3.95 per cent to 3.41 per cent.

In January, Lloyds Bank launched a new deal to help first-time buyers get onto the property ladder without them needing to put down a deposit - as parents put money into a savings account instead. A similar mortgage deal is offered by Barclays.

Look at savings schemes which could give your bank balance a boost

Consider Government-backed schemes, such as the Help to Buy ISA. For every £200 you save, you can receive a bonus of £50 (maximum bonus amount is £3,000). The Lifetime ISA, which can be opened by people aged 18-39, also helps people save for their first home or their retirement in the same pot.

Tips for parents

Agree 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, and for those who do, the average is £161 a month, according to Charter Savings Bank’s research. 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 a fair amount for adult children to contribute, bearing in mind some may also be struggling with debts to pay off, and unpredictable incomes if they’re just starting their career.

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 some day, be precise about how and when you expect this to happen, to avoid rows and misunderstandings.

Don’t forget about your finances

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.

Free retirement guidance for over-50s is available from the Pension Wise service. And the Department for Work and Pensions has just launched a new “mid-life MOT” website (yourpension.gov.uk/mid-life-mot), with help and guidance for people taking stock of their pensions, careers and health.