The idea of moving back in with their parents is one that makes many adult children cringe. But what some might have dismissed as a regressive step is increasingly seen as a pragmatic or even necessary one, particularly when it comes to financial matters.

The economic effects of the pandemic have accelerated what was an already growing trend of grown-up children flying back to the nest. The number of 20- to 34-year-olds living at home increased by 46% to 3.5 million in the 20 years to 2019, according to the Office for National Statistics (ONS)¹. It said the rise steepened after the 2008/09 financial crisis, while it also pointed to a fall in home ownership among younger age groups as house prices increases pushed the first rungs on the housing ladder out of reach².

The challenges

There are potential benefits for both parties when children move back into the family home, particularly if the relationships are positive. The financial advantages can also go both ways if adult children are sharing the burden of household costs, rather than simply adding to them. By helping adult children save money now, parents can help give them more financial freedom later on.

But there can be a price to pay, particularly for parents providing financial support to their grown-up children. Parents may resent the impact on their lifestyles, living arrangements and especially their financial wellbeing: adult children returning to their parents’ home during the spring lockdown period added more than £2,700 to total household costs, according to research by Barclays³. While it’s a price that parents are often willing and able to pay, it can also add to any existing money worries. Yet just one in 10 parents have asked their children to contribute rent, the survey found, with a quarter admitting to feeling awkward at having to ask for the help.

It’s good to talk

Many of us feel reluctant to talk about our finances, whether to family, friends or even strangers. While topics such as interest rates and mortgages are commonly discussed, our own money situations often remain out of bounds. It’s a reticence that may prove costly, especially when it comes to family finances.

There are a few steps that can make it easier and prevent conflict down the line, however. For example:

• Decide what you’d like to discuss – and the best way to go about it. This could mean having a casual chat over dinner, or a more formal, planned family meeting in the living room. Whichever approach you take, be sure to give everyone involved enough time to get their thoughts together though.
• Involve anyone who might be affected by the decisions being taken. It’s vital that the whole family feels included and heard, and comfortable speaking out. And who knows – you may even find that they provide you with a fresh perspective on the subject at hand; one you wouldn’t have considered otherwise.
• Stick to the topic. When it comes to conversations about money, emotions can run high – especially in times of stress. It’s important to be sensitive to others’ feelings and points of view, and not get side-tracked. Be sure to cover everything you’d hoped to, to everyone’s satisfaction – and keep going until that’s happened.
• Think about bringing a financial adviser into the conversation. As an impartial, informed third-party, they can help to manage the tensions, keep the conversation on track, and explain the various options available – all while looking out for your financial wellbeing and not just your finances.

Making it work

Adult children often move back home for financial reasons, particularly in the current climate. Redundancy, reduced hours, problems making rent payments or simply a desire to save money and build a mortgage deposit are all common drivers for the decision to return to the family home.

Not having to pay rent and other costs is a great opportunity to create a financial buffer and generate savings (although that advantage might be eroded if it turns out it’s not a free ride). So how do you ensure it’s a financially productive move?

Setting goals can help, whether it’s a projected moving-out date, saving a certain amount or clearing debts. Having targets in place will provide a focus and ensure that both parties can see that the time at home is being used well. Similarly, creating a budget helps to maximise savings and make clear the extent to which adult children can help with household costs without making it harder for them to rebuild their independence.

Moving back home might be a move borne more out of necessity than choice, and it can have its downsides as well as its benefits. Either way, however, it can be a smart financial move for all concerned.