Money and Life
(Financial Planning Association of Australia)
In the wake of the COVID-19 pandemic, many young adults have been forced out of work and back into the family home. As the pandemic stretches on, how can you manage the added cost of supporting your children – and help them get back on their feet?
There’s no question young people have been hit hard by the COVID-19 pandemic. From casual job losses to widespread hiring freezes, they’re on the front line. Experts fear the youth unemployment rate, which was 16.3% in July, will remain stubbornly high for years to come
So what are young people to do? Unable to get secure work, many will opt to live at home for longer or return to the family home, accelerating an already a growing trend.
Why are adult children staying at home?
Census data shows that we’re living at home for longer than ever, thanks to cost of living pressures in our major cities.
Just over 43 per cent of adults aged 20-24 years still live at home according to the latest Census data, while 40 per cent of those can’t afford to leave. It’s also common for adult children to return home for periods of time, due to financial pressures.
What’s the impact on parents?
While most parents are happy to help out, having adult children at home is an added cost. Mozo estimates that one third of parents spend between $51 and $100 a week to support their adult children, with another third spending up to $200 a week.
That’s a whopping $12.2 billion a year being spent by Aussie parents to support their adult children living at home.
Not to mention, having multiple generations of adults living under one roof can create tensions around roles and responsibilities.
How can parents support their adult children?
As the pandemic stretches on, what started out as a temporary move home can become more permanent. So how can you support your kids, when they have limited options?
First of all, it’s important to know that your children are facing an extremely unusual set of circumstances. The pandemic-fueled job losses are coming on top of years of stagnant wage growth and job insecurity, creating the perfect storm for anyone trying to enter the workforce.
The Centre for Social Impact (CSI) says young Aussies will find it harder to transition from education to work as a result of the pandemic. That means they’re at risk of becoming financially disadvantaged, and at higher risk of experiencing mental health problems as a result.
Positive parental support will be essential to keep your kids engaged and motivated to get through the next few years.
This is the ideal time to reinforce resilience in your children. Resilience refers to “a person’s ability to cope with ups and downs and bounce back from the challenges that life can throw at us.”
There’s literally no better skill to equip your children with. A resilient young person will be better able to keep events in perspective, work through problems and seek out help and support. You can find a range of tools and resources on resilience on the BeyondBlue website.
In addition, while job prospects might be slim, it’s important for anyone who is out of work to stay actively engaged with the job market. That might mean proactively pitching for work, having networking meetings, seeking a mentor, volunteering for a local organisation or taking a short course to improve their skills.
This will help your kids grow their network and open up the ‘hidden job market’. It also fosters a sense of purpose that’s essential for getting through challenges like COVID-19.
Teach financial independence
While it might be second nature to support your kids financially, it doesn’t always help them in the long run. It’s important to try and foster financial independence as early as possible, to help prepare them for a time when they’ll need to provide for themselves.
Asking for a contribution towards their living expenses is one way to do this, provided they have a regular source of income. Or, if you’re not keen on asking for a monetary contribution, discuss how else they can contribute around the home.
Sharing your money management skills with your kids by teaching them to budget and pay for everyday expenses is another way you can instill good financial literacy. Introduce them to budgeting apps and teach them skills like bargaining and negotiation.
Defining roles and responsibilities
Much like living in a share house, multiple adults living under one roof can cause tensions, especially if not everyone is contributing equally.
In a share house environment, house rules and expectations allow everyone to live together peacefully. Observing house rules, being considerate of other people’s property and keeping the place clean are the basics.
It’s best to explain the ground rules before your child moves back in, so there’s no misunderstandings. LegalAid NSW says it’s a good idea to put this in writing, so there are no misunderstandings. If you’re planning on charging rent, you can even sign a residential tenancy agreement.
Managing the cost
The cost of having your adult kids living at home may be coming at a time when your own financial situation is less secure than usual. With the regular unemployment rate expected to top 10 per cent, it’s understandable if you find yourself facing some of the same challenges as your children.
If finances are a concern, we suggest reviewing your family budget straight away to see where you can cut back temporarily. Have a discussion with your children early on about what they can contribute in terms of rent or household duties. Even if they don’t have an income, there may be an alternative.
For example, if your son or daughter helped out with cooking and cleaning, could you pick up another shift at work? Or could you pay them to do some of the work around the home? Try to think outside the box about how everyone can work together to maximise your income and minimise your expenses for the duration.
We all want to do the best by our children, especially during difficult times like a global pandemic. By enabling them to be more resilient, supporting them while they search for work or further their education and preparing them financially for life out of home, you can enjoy a happy household for years to come.
For expert advice on your finances, speak to a financial planning professional.