Parents are grappling with escalating financial pressures as they continue to support their children into their twenties and thirties.
Factors such as limited housing options, the cost-of-living crisis, and a scarcity of employment opportunities are hindering adult children from leading independent lives.
According to the 2021 Census, approximately 4.9 million adult children reside with their parents, marking a 14.7% increase since the 2011 Census. This trend not only stagnates the housing market but also intensifies the financial burden on parents.
The Wealth and Wellbeing Report from LV=, a quarterly study of the UK population, reveals that 22% of respondents would financially assist their children or grandchildren through equity release.
Government data indicates the average cost of raising a child to 18 in the UK is £223,256 (around £12,400 per year).
LV= has explored the potential financial requirements for raising a child until the age of 30, where beyond standard living costs, parents may need to cover significant additional expenses for their adult children, including:
– Mortgage contributions: Estimated additional cost of £50,000 per child. The prohibitive cost of property ownership is a key factor behind adult children living at home. The average price of a house in the UK in July 2024 was £266,400 which is beyond the reach of many young adults. Parents often contribute towards a deposit or mortgage premiums to help their children onto the property ladder.
– Education fees: Estimated additional cost of £30,000 per child. Recent studies show that 71% of parents contribute to their children’s university costs.
– Wedding costs: Estimated additional cost of £10,000 per child (based on parents contributing 50% towards wedding fees). The average cost of a UK wedding has surpassed £20,000 for the first time, with many parents making a significant contribution.
– Grandchild support: Estimated additional cost of £20,000 per grandchild. Many parents in their thirties rely on their parents for financial support, especially for childcare costs. For example, it costs over £7,000 per year on average just for one part-time nursery place and even more in areas like London and South East England, with grandparents contributing towards these vital expenses while parents go back to work.
The financial support provided by parents to their adult children may be impacting their retirement planning too.
LV’s Wealth & Wellbeing Report found 71% of people aged 35 to 54 are uncertain about avoiding running out of money in retirement, while 60% of adults over 50 believe they will struggle once they give up work.
Gary Beyer, Protection Proposition Director at LV=, said: “Raising a child is getting more expensive, and many families are feeling the strain as the cost of living rises.
“This is especially true when children are young, with childcare costs continuing to increase, however, the trend of helping children financially also continues into adulthood with parents contributing towards mortgages, education fees, wedding costs, first car purchases, and other major expenses.
“An unexpected event like an illness or accident can also significantly impact a family’s finances and that’s why it’s important for parents to have a plan to protect against a sudden loss of income, such as considering income protection or critical illness insurance.”
In total, the cost of raising a child to 30 is approximately £333,256.
This includes £223,256 from birth to 18, plus an estimated additional £110,000 from the age of 18 to 30.
Meeting these expenses has become a significant challenge for parents during the cost-of-living crisis.
LV’s Wealth & Wellbeing Report found 21% of people with investable assets of £100,000 to £500,000 said they can only just afford day-to-day costs, and almost a third (31%) have reduced or stopped their pension contributions.
