Parents without empty nests: How to agree on a fair deal

Here’s why rent-free living is not ideal for adult children moving back home or lingering for longer in mum and dad’s nest.

Anthony KeanePersonal finance writer

@keanemoney

3 min read

April 15, 2022 - 8:30AM

The Australian Business Network

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Soaring house prices, rents and other living costs are prompting more adult children to live with their parents, potentially causing tension when finances are not first discussed.

Compare the Market says rents in most capital cities have climbed sharply, and its research has found two-thirds of homebuyers expect some help from their parents saving for a deposit.

But that help shouldn’t extend to rent-free and expense-free living with mum and dad long into adulthood, money specialists say, as it could be detrimental to children’s future financial success.

“With the average first home buyers now aged in their mid-30s, more families might be looking at a Packed to the Rafters situation,” Compare the Market spokesman Chris Ford says.

House prices climbed 18.2 per cent nationally in the year to March 31, according to CoreLogic data, while rents also rose strongly in the same period – up 8 per cent across capital cities and 10.7 per cent in regional areas.

“Everyone is feeling the squeeze with cost-of-living pressures this year,” Ford says.

“Conversations can be awkward, but contributing to the family budget can help young people prepare for life outside. Consider the cost of bills, groceries and electricity and what proportion can be attributed to the child.”

THINGS TO CONSIDER

Ford says both parents and adult children should consider issues such as privacy, setting boundaries, alone time for everyone, and how much the child can help.

He says adult children moving back home should:

• Have a long-term plan and use it as an opportunity to save money and build a deposit.

• Contribute to household bills as a dress rehearsal for independence.

• Understand that living together can be challenging, and it’s OK if things don’t work out and you decide to move out.

Moving back home with mum and dad should come with pre-agreed boundaries.

“Contributing to bills is one thing, but also consider how to help out around the home,” Ford says.

“It can quickly lead to conflict if you are not only a drain on the family budget but also the jobs around the house.”

LCI Partners managing partner Gerry Incollingo says it can be a good idea for kids to help out financially, but parents should not overdo it by charging children more than 30 per cent of their income.

“If they are on a small salary and are going to university, that may stop them from affording to move out later and could put them under too much financial pressure,” he says.

“Remember to consider what they are earn versus the cost of living if you don’t actually need the money from them.”

ADVANCE WARNING

Incollingo recommends parents warn children in advance – ideally a few years ahead – that they will need to help by paying rent. “Surprising them with that news can cause unnecessary stress, especially if they are new to working and they are also studying,” he says.

“Make sure they also have some household responsibilities. They are adults now after all.”

Communicating early can help prevent parents becoming frustrated about kids not “pulling their weight” and avoid the children becoming resentful of having new rules, Incollingo says.

Rising numbers of parents are going guarantor to help their adult children make their first property purchase, some are handing out early inheritances to help them get a foot in the door, while others are jointly buying investment properties.

Helping around the home creates a happier household, experts say.

“In theory (investing with adult children) is a good strategy to help your kids get onto the property ladder sooner and start building equity,” Incollingo says.

“If the investment is positively geared, then they will have more money to put towards rent or savings. It is also a good way to teach them about investing.”