Working as a financial planner affords one the opportunity to become intimately involved in a client’s financial and family life. On occasion it can also shed light on interesting demographic trends when certain patterns or events repeat themselves across a client base.
One such trend that has become evident in recent years is that of that of young adults in their 20s and early 30s living at home with their parents. This is a world-wide phenomenon and there are different terms that are used to describe it: "the boomerang generation" and "adultescents" being examples. The boomerang description stems from the experience where children leave home, typically after completing their education, but then return home after travelling or living on their own for a few years.
Canadian census figures from 1981 reveal that 27.5 percent of children between 20 and 29 lived with their parents. In 2001 the figure had grown to 41 percent.
In the United Kingdom recent official statistics from the Office for National Statistics reveal that almost three million people between 20 and 34 are living with their parents. This figure is 20 percent up since 1997.
More than one million under-25s are unemployed.
Current youth unemployment in Spain is regularly reported in the press as being over 50 percent.
The main reason for this trend is economic. Real wages for the middle class western countries have slowly been declining over many years due to advances in business technology and efficiencies. Outsourcing of manufacturing jobs to Asian countries has also contributed. Property prices are higher than in previous decades, making it difficult for first-time buyers to enter the market. A university qualification no longer guarantees job stability and a middle-class lifestyle.
Although there may even be some positives to the boomerang phenomenon, such as increased family time and potentially closer-knit families, there are undoubtedly some negatives as well. A culture of dependency and entitlement may develop. Inter-family relationships could be adversely affected if sufficient space and independence are not available. Children may find it more difficult to establish long-term relationships with a life partner from the confines of their parents’ home.
From a financial point of view, there are also many factors to be aware of. Parents that pay for hidden costs such as extra food, water, cleaning and electricity may need to quantify the impact of their generosity on their own retirement. As an example, the opportunity cost of spending R3000 per month over a ten year period is close to half a million Rand.
A boomerang child could delay a housing downscale (a move from a family home that has become too big to a smaller flat or retirement village) that could free up capital for further investment at an important time in a parent’s life.
Children that continue to live at home are very unlikely to be paying for their own medical aid or disability insurance, and the parents may feel pressurised to pay for these important benefits. If they don’t, they could end up having to pay for substantial medical bills in the event of a serious injury or accident to their child.
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