Keep retirement on track with kids living at home

Got your adult kids living with you? You’re not alone.

According to ABS data, more than 1.5 million Aussie families have an adult kid living at home.

Recent census statistics reveal that over 43% of young adults aged 20-24 and 17% of those aged 25-29 continue to live with their parents. An increase in young people undertaking higher education, a tendency to defer marriage, the higher cost of housing in Australia and the COVID-affected economy has seen these figures grow over the years.

While lots of kids can’t wait to fly the nest and get their own space, there are many others that for a variety of reasons, can’t, or don’t want to take those next steps. Maybe your kids came back due to changing circumstances, or maybe they never left. Maybe you love it, or maybe you’re ready to have an empty nest.

No matter what the circumstances are – if you have a ‘kidult’ at home it’s extremely important to keep yourself financially sound for now and the future.

What’s the effect on parents?

While parents ultimately want the best for their kids, it can sometimes lead to personal scarifies that have lasting effects on their financial situation. According to Inspired Money, “Aussie parents have coughed up more than $26 million to help their adult kids since COVID-19 hit our shores – and 1 in 5 is at financial risk from doing so.”

And South Australian parents are among the most generous in the country according to Finder, who report “South Australia has the highest proportion of parents who support their adult kids financially, with over half (54%) opening their wallet.”

The consequence of this means it’s likely that when parents should be maximising their own retirement funds, they’re still supporting or partially supporting their kids. Even if retirement is a few years away, we all know it pays to be prepared. 

Stay informed

If you’re placed in the position of having your adult kid live with you, careful planning is essential to ensure you still have the means for a comfortable retirement. You will need to seriously consider the following:

• When you plan to retire.
• What retirement income you require to support your intended lifestyle.
• How much you will need to have accumulated at retirement.
• How much you will need to save in the meantime.

Armed with this information you can establish a savings strategy and determine how you can meet your objectives.

If you need help you can talk to a financial planner to get some guidance and advice on managing your finances to achieve your retirement goals.

Set expectations and be open to discussions

If your kids are moving back in it’s the perfect time to start an honest dialogue with them. If they’ve been living with you the whole time, it will be important to setup some time with them to have a real conversation.

To limit the chance of tension going forward you’ll need to talk about how you want it to work, what you expect from them both financially and around the home. It’s also a good idea to talk about how long they plan to stay living with you.

Keeping conversations direct will make it easier for everyone to be on the same page and working towards the same goal.

Every situation will be different but it’s important to look at how your kid will contribute financially. Discuss their monthly income and how much of that you would like them to put towards expenses or towards savings.

Even if you’re happy to cover the costs, it might be wise to have them set up payment schedules to savings, so they get used to outgoing money. Encouraging them to contribute not only to their own savings but to your home will help them understand the way money can be spent and the unexpected life events, big or small, that can derail saving plans.

This is general advice only and doesn’t take into account your financial objectives, situation or needs. Conditions, fees and lending criteria apply and are available on request.