Adult children living at home: what could it mean for your retirement?

Having your adult children living at home can be a great way to support them while they save, look for work or plan their next move.

But it can also add to your household costs at a time when you may be preparing financially for retirement.

Having an adult child aged 18 to 25 living at home could cost parents around £3,400 extra a year in household expenses.

So, what could this mean for your retirement plans? And how can you balance helping your family with looking after your own financial future?
 

Why are more adult children living at home?

Living with parents has become more common for young adults.

More than 3.8 million families in England and Wales have adult children living at home, with around 4.9 million adult children living with their parents.

And 23% of parents with adult children have had them move back home after previously moving out.

There are many reasons why adult children may stay at home or move back. Higher living costs, saving for a house deposit or changes in work and relationships can all play a part.

And support can work both ways. Some adult children living at home may also provide care or other support for their parents.
 

How much could having an adult child at home cost?

For young adults aged 18 to 25, living at home could cost parents around £280 a month, or £3,400 a year in additional expenses.

Of course, every household is different. Your child might pay rent, contribute towards bills or help in other ways.

But if you're covering most of the extra costs yourself, they can add up over time.

For many people, this can come at an important time financially, when they may be paying down a mortgage, building retirement savings and thinking about how their income could change once they stop working.
 

Could it affect your retirement plans?

There's nothing unusual about wanting to help your children. But it's important to think about your own finances too. If your household costs have increased, it could be worth looking at:

• how much extra you're spending each month

• whether your child could contribute towards household costs

• how long they're likely to stay at home

• whether the extra costs are affecting your savings or pension contributions

• any mortgage or other borrowing you still need to repay

• how much income you may need once you retire

Understanding the impact now can help you decide how much support you can comfortably provide without losing sight of your own plans.
 

What if you want to help them move out?

For some parents, helping an adult child doesn't stop at providing somewhere to live.

You might also be thinking about helping them with a house deposit or other costs involved in moving into a home of their own.

There are different ways you could do this. You might have savings or investments you could use. If you're a homeowner, you may also consider whether you could use some of the money tied up in your property.

Before giving away a large amount, it's important to think about what you might need yourself later.

Consider unexpected costs, your retirement income and whether you may need money for care or other expenses in the future.

There can also be tax considerations when giving money to family, particularly when it comes to inheritance tax.
 

Could equity release be an option?

If you're aged 55 or over and own your home, equity release is one way you may be able to access some of the money tied up in your property.

Some people use a lifetime mortgage, a type of equity release, to repay an existing mortgage or provide financial support to their family.

But equity release isn't right for everyone, and there are other options to consider.

A lifetime mortgage is a loan secured against your home. Interest is charged on the amount you borrow.

If you don't make payments, interest is added to the loan and compounds over time. This means the amount you owe can grow quickly.

With a lifetime mortgage, there are typically no monthly repayments to make, as the loan and any interest added are usually repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care. Some lifetime mortgages allow you to make payments towards the interest or capital. Depending on the plan, this can reduce the amount owed over time.

Equity release will also reduce the value of your estate and could affect how much inheritance you leave. It may affect your entitlement to means-tested benefits and reduce your financial options later in life.

You can find out more about the benefits and drawbacks of equity release before deciding whether it's something you'd like to explore.

Our fixed advice fee of £1,699 is only payable on completion
 

What other options could you consider?

Equity release is only one option, and using money from your home won't be suitable for everyone.

Depending on your circumstances, alternatives could include:

• asking your child to contribute towards household costs

• using existing savings or investments

• providing a smaller amount of financial support

• looking at other borrowing options

• downsizing to a smaller property

It's important to consider these options alongside your own needs and plans for retirement.

If you're considering equity release, a qualified adviser will look at your circumstances, your future plans and the alternatives available before making a recommendation.
 

Balancing their future with yours

Helping your children can make a meaningful difference, whether that's giving them somewhere to live or helping them towards a home of their own.

But your own financial security matters too.

As our CEO, Will Hale, explains:

“Parents inevitably want to help out children and that is demonstrated by the numbers of adult children returning to live in the family home. Helping children can come at a cost however and parents need to consider their own financial situation.”

Taking time to understand what you're spending, what you can afford to give and what you may need later can help you look at both sides of the decision.

And if you're considering using money tied up in your home, getting regulated financial advice can help you understand your options and the longer-term impact before deciding what's right for you.