6 money tips for when your adult children move back home

Once upon a time, our children flew the nest, buckled down in a job, got married and started a family - all in reasonably quick succession.

But thanks to high property prices for both renting and buying, plus job insecurity - the number of young adults aged 20 to 34 sharing a home with their parents is at its highest for 20 years ago, according to the ONS. Moving back in together is a great idea for your children financially, as it allows them to save on their rental costs each month, money which will grow quickly if invested well.

Moving back in together is a great idea for your children financially

As for us, the majority can expect more than 20 years of retirement nowadays, however with many feeling too guilty to charge rent to our offspring, what do these extra household costs mean for our funds? We look at how to avoid cutting too much into your nest egg and enjoy spending more time with your children.

1. Avoid being the guardian angel

Although your children are now physically living under your roof, they shouldn’t have to cost you any extra in outgoings. Don’t be embarrassed to ask them to contribute to bills – it doesn’t mean you don’t love them, it’s simply the fairest thing to do. Agree how the costs of all bills and food should be split and stick to it, ensuring they set up monthly direct debits as they would if living alone.

2. Aim for a straight down the middle approach

In some circumstances the benefits of moving back in together can be shared more equally between parents and children. It’s not too harsh to include a small amount of rent in the amount you ask for as a contribution – just talk through their incomings and outgoings before they move in and agree an amount that’ll work for both parties.

3. Take small steps to minimise a change in outgoings

Even if your children contribute to bills and pay something towards rent, it's likely that your overall costs will rise, even if for the simple fact that you may need to sub them money from time to time. You can offset this at an early stage by looking at your outgoings and cutting any wasted expenditure. That means searching for the best utility deals regularly and removing any subscriptions that you don’t use.

4. Keep a close eye on your finances and adjust quickly

This is probably one of the simplest, but best tips I can give. Anticipating that you may need to lend a little money here, or cover the weekly food shop there is the first step, but if this is becoming a regular occurrence, changes need to be made sooner rather than later as it all adds up. Five years of overspending by £500 a month - instead of investing the money in a pension - means you’d miss out on £45,000 extra in your retirement fund. And if you’d have invested this money in an ISA you could have had around £36,000.

5. Teach your children about the basics of personal finance

The most important building block of personal finance is compounding. This is the mechanism by which financial cost and benefits grow. If their investments are left alone they will eventually grow to many times the value of their initial stake. Similarly if they are in debt and the interest rate is too high this can quickly balloon into a big problem.

The best behavioural step you can take to try and help your children is to set them up with the right habits; everyday things like being careful what you spend and not wasteful.

6. Work out a plan you can both stick to

Sit down with them and both divide all of your expenses into two groups; essential and discretionary. Start with the essentials, such as utilities and mobile phones, and make sure you have recently made the effort to get these services for the least possible money; it’s amazing to many how much can be saved! Only then should you each turn to the fun stuff. Once you’ve cut back on the essentials you can set a realistic budget for fun and decide yourselves how you allocate it. Make sure you set a budget though, as everyone is better when working to a plan.

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Thanks to Guy Myles, CEO of next generation financial advisers Flying Colours

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