Early preparation in life is key to becoming financially independent
As the coronavirus (COVID-19) pandemic continues into a second year, we’re learning more and more about its financial impact. While many individuals and families are struggling up and down the country, there is a particular strain placed on the parents of adult children.
A recent survey showed that 50% of adults with children over the age of 18 have provided financial help to them due to the pandemic. Children may be staying in the family home for longer, since universities are unable to operate as they usually would, and some young people have decided to postpone their studies.
Young professional lifestyle
Those who have finished their degrees, who might usually migrate to city centres for a taste of the young professional lifestyle, are instead moving back in with their parents until this becomes a viable option again.
Young workers who are inexperienced or unskilled may struggle to secure their first job or may be particularly vulnerable to redundancy. Even if they are not living at home, they may have needed to seek support from older family members.
Providing financial help
As most forms of entertainment were closed for a significant portion of the last year, many young adults have seen their spending drop. But their costs still potentially included rent, utilities, phone bills, food and petrol. Many also turned to their parents for help to buy equipment they needed to work or study at home, such as computers.
The survey highlighted that some parents who have provided financial help have spent an average of more than £400 a month.
Higher household costs
Adults over the age of 30 have been less likely to need financial help. 43% of parents with children aged over 30 reported that they were helping them financially, compared to 61% of parents with children aged 18-29.
But the cost of helping someone who is older has been higher. Those parents who have been providing support to the over-30s spent, on average, more than £500 a month. These adult children are less likely to be living with their parents and tend to have higher household costs.
Ranked by spending
Some parents have offered far more than the average of around £1,300 in support. The top 2% of parents, when ranked by their spending, have parted with over £3,300 monthly. This includes help with their children’s everyday expenses, contributions to savings accounts and pensions, and potentially help to rent or buy a home. Many parents have been prepared to offer this level of financial support to adult children if they’ve been able to.
If you have found yourself in this position you may need to examine your budget carefully and ensure that your other financial priorities, such as paying off debts or saving for retirement, are not suffering as a result. Preparing your children early in life to be financially independent is essential. If not, your retirement plans may need to include funding your child’s future lifestyle!
If you have any questions relating to this article or would like to discuss anything in more detail then please do not hesitate to contact our Cornerstone Partner, Alan Reid. Alternatively, you can contact us via our contact form.