How much are adult kids living at home costing parents?
Parents are forking out on average an extra £414 per month to afford their adult children remaining in the family home for longer than expected, with a third delving into their pension fund to manage financially (31%).
On top of this, three in ten (29%) adult children living in the family home don’t support their parents financially, despite the average cost of them staying at home totaling just under £5,000 per year (£4,972).
This new insight comes from research1&2 undertaken by pensions advice specialist, Portafina, who looked to identify the financial impact of adult children flying the nest later in life.
With 17% of the young adults polled saying they expect to move out aged 30+, and one in twenty (5%) parents polled admitting their children may never move out, parents could find their finances affected for longer than they expected.
When it comes to the ways parents are affording the extra cost of adult children living at home, the results are concerning:
- Taking money from their pension pots (31%)
- Taking money from savings (28%)
- Altering their lifestyle (19%)
- No longer able to downsize and enjoy retirement (13%)
- Continuing to work for longer (11%)
With almost a third of parents (31%) admitting they are taking money from their pension to afford the extra monthly cost, Portafina warns this could have a hugely negative impact upon their finances in retirement.
YouGov3 reports that two in five (42%) Brits feel that they probably, or definitely won’t have enough money to live on when they retire. A parent withdrawing £200 a month from a pension pot between the age of 55 and 60, to help with the costs of an adult child living at home, could be left nearly £14,000 worse off compared to leaving the money invested in their pension*. Highlighting that dipping into pension savings early is not a decision to be made lightly.
Commenting on the findings, Jamie Smith-Thompson, Managing Director of Portafina said:
“As our children get older there’s a traditional view of cutting the apron strings as we wave them off into the big wide world. Even though most of us will want to be there to help when needed. As a parent of two, it’s unnerving to me that parents are suffering financially as a result of their adult children not moving out of home.
“If one in twenty parents can’t see that their children will ever be able to afford to move out, dipping into their own pocket to help out feels likes an obvious choice. With parents choosing to sacrifice their pension pots to cover the additional costs created by adult children living at home, what happens when they reach retirement? If not thought through carefully, using their hard-earned money this way now could have a massive impact on their own quality of life further down the road.
“While it’s great to want to help financially, parents are clearly facing a fine balancing act between their innate need to support their children and their own need to fund a retirement that’s comfortable. With the scrapping of the Help to Buy ISA this November, I hope the government will look to launch a new incentive that benefits both parents and children alike.
“If you’re considering dipping into your pension to make ends meet, always speak with a regulated financial adviser first. You could face an expensive tax bill if you take out more than 25% of your pot. And it’s important to understand the financial implications using your pension cash now, rather than in the future, will have on your retirement plans.”Jamie Smith-Thompson, Managing Director
2Survey of 1,001 UK adults aged 18-54 carried out in August 2019
*(Based on £50,000 sum at onset, 6% annual growth over 5 years, charges and inflation not applied.)