Are your adult children still living at home?
September 23, 2022
There was a time when young adults eagerly anticipated moving out and getting their own "pad." One and a half million adult children increasingly opt to live with their parents well into their late 20s, signaling the end of those days.
According to the most recent census data available, 17% of young adults aged 25–29 and over 43% of young adults aged 20–24 still live with their parents. This is brought on by the fact that more young people are enrolling in higher education, that marriage is often put off, and that housing is expensive in Australia. An average family is thought to spend $812,000 raising two kids from birth until they are 24 years old.
How does this effect the parents long term?
The parents are probably certainly in their 50s or early 60s and are preparing to spend some time alone when they have "children" who are 20 or older living at home. The young adults may occasionally help with household expenses after they are fully working. Even if they are working and attending school, some parents can be hesitant to ask their "children" to pay for their education.
The result is likely that parents continue to provide for or subsidise their children during a period when they ought to be maximising their retirement savings. Mum and Dad might have sold the family house and relocated to a smaller property if they had been left to their own devices, but they now believe that this is unfeasible given the situation.
It is time to think about your future.
Careful planning is necessary if you find yourself in this type of situation. To make sure you still have the resources for a comfortable retirement you should give the following some serious thought:
• What date do you intend to retire?
• How much money will you need to set aside while waiting?
• How much will you need to have saved up by the time you retire?
• How much retirement income would you need to maintain your desired standard of living?
With this knowledge, you may create a savings plan and work out how to achieve your goals. Make an appointment with us if you need support, and we'll walk you through the process. We can assist you in managing your finances, but we cannot urge your children to leave the nest.
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One of the most important decisions a person makes is whether to purchase a home. The importance of making a wise financial choice, like purchasing a home, is amplified in today's society where the proportion of homeowners to renters is declining. However, the majority of homeowners fail to take into account the rates on their mortgages. According to a recent survey of 1,000 Australians, 55% of Australians don't know what their mortgage rate is. The homeowner may suffer negative financial consequences. A homeowner could be paying double the interest with an interest rate increase as low as 2%. But why is this important for homeowners? Knowing how your home loan affects your finances is more important than simply understanding it. Using the year 2022 as an example, a rise in inflation led to the Federal Reserve raising interest rates, which slowed down consumer spending. Unfortunately, this had a significant effect on homeowners' borrowing rates as well. The amount of interest you pay on your principal amount each month increases as interest rates rise. You’ll have to pay more to pay off your mortgage, which could eventually lower your standard of living. For example, let’s say your interest rate has increased from 3% to 5% on your home loan of $500,000. If we calculate the difference in monthly interest it would look like this. Current monthly interest calculation: ($500,000 x 3%) / 12 = $1,250 per month New monthly interest rate after increase: ($500,000 x 5%) / 12 = $2,083.33 per month That is a substantial increase in monthly repayments by $833.33. This money is a big difference to your bank accounts. You may know someone who has been through these changes, or you might be going through it right now. For knowledgeable guidance on how to lower your home loan rate, consult a mortgage broker. This straightforward action might end up being one of your best choices.
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If you entered the world between 1980 and 1996 you’re part of the “millennial generation”. You’ve grown up in an age of unprecedented abundance and incredible technical innovation, and as a group, enjoy a greater wealth of opportunity – professionally, socially and recreationally – than any previous generation. Many goods and services have never been cheaper in real terms, allowing you to live more for today than adopting your parents’ and grandparents’ single-minded focus on buying a home and saving for retirement. Career or a combo? That’s not to say you don’t face challenges. Increased employment casualisation, short-term contracting, and the threat of automation, can potentially threaten your job security. Or you might actually embrace a ‘come and go’ career, interweaving periods of work with stints of travel, child-raising or volunteering. Indeed, many millennials are discovering that the whole concept of work versus recreation is becoming blurred. With a computer the primary tool of trade in many professions, you may be able to work just as easily from a spare bedroom in Berlin or Barcelona as in Parramatta or Perth. Medical advances promise a long and healthy life, meaning you may not even intend to ‘retire’, choosing to work for as long as health allows. Is home ownership that important? Some of your cohort find it liberating not to be tied down to one place by a mortgage and a heap of stuff, however the likelihood is that if you haven’t bought a house already, you still aspire to the great Australian dream of home ownership. This is a real challenge particularly for younger millennials and may involve unacceptable compromises such as living a long distance from work. But attitudes to long-term renting are changing. While Australia has yet to develop both the culture and cooperative ownership structures that make life-long home rental the norm in some countries, it’s a sure bet that enterprising millennials are working to change that. In any case, renting can be an economically viable alternative to buying. There’s an app for that Whether it’s finding a meaningful job, financing a new venture through crowd funding, borrowing through P2P platforms, finding a house or just a room, or even looking for love, you know where to find the apps. Still, with the mass of opportunities that have arisen from greater connection and changing social attitudes, life is in many ways more complicated than it was for your forebears. Let’s talk about money Managing money is no exception. For a start, there’s the challenge of working out what the right balance is between funding a desirable lifestyle now and saving for medium and long term goals. Once that’s decided there are the questions of how to save and where to invest. The Internet is awash with information and advice, with much of it of a high standard. Unfortunately this is balanced by a vast amount of misinformation and an abundance of shonky investment offers, making it difficult to distinguish the good from the bad. Fortunately, help is at hand. We’ve made it our business to understand the wants and needs of all generations. There is more to life than saving for retirement and maximising entitlement to the age pension. If you have that millennial feeling and need some advice on how to manage your unique financial needs to get as much out of life as possible, check out our website or find us on Facebook and LinkedIn, then contact us for a chat.
