"That’s an extra £400 a month we have to find."
The “Bank of Mum and Dad” is becoming more of a nightmare as a result of Britain’s youth jobs crisis.
Around one in three 18 to 34-year-olds in Britain now live with their parents, as high housing costs collide with a difficult jobs market for young people.
For graduates, years of university study and debts of up to £50,000 can lead to hundreds of applications without a secure route into work.
Parents are consequently supporting adult children for longer, often while managing their own household costs and retirement plans.
It is becoming a wider economic issue, with billions being diverted from discretionary spending towards financially supporting adult children.
Why Young Adults cannot Afford to Leave Home
Leaving home has traditionally been one of the clearest signs of financial independence, but that milestone is becoming harder to reach.
The housing market is a major part of the problem.
Young adults need enough income to cover rent while also trying to save for a deposit, but both goals become difficult when employment is uncertain or salaries do not keep pace with housing costs.
The jobs market is creating another obstacle, particularly for graduates.
Official figures showed unemployment among 16 to 24-year-olds rose from 16.2% to 16.4% in the three months to July, its highest level in more than a decade.
Graduate vacancies have also fallen sharply. Data from jobs website Adzuna showed the number of UK graduate vacancies had halved in a year to just 8,383 in July.
That figure was only one sixth of the peak recorded in 2017.
Graduates can therefore leave university with significant debt and qualifications, only to face a much smaller pool of suitable jobs.
The problem also extends beyond graduates.
The Office for National Statistics estimates that around one in three 18 to 34-year-olds, potentially around five million people, are living with their parents.
That includes more than a quarter of the almost one million young people classed as NEETs (not in employment, education or training).
Research from the Institute for Fiscal Studies has also identified more than 300,000 “hidden Neets” who are not claiming benefits.
Most of them are understood to still live with their parents, leaving families to absorb many of their living costs.
For some young adults, staying at home is a temporary way to save money while they establish their careers. For others, unemployment, low earnings or housing costs can make moving out financially unrealistic.
The result is a reversal of the traditional sequence in which children left home, established themselves and became financially independent.
Increasingly, parents are providing that financial bridge well into their children’s adult lives.
The Growing Cost for Parents
Supporting an adult child at home can be considerably more expensive than simply adding another person to the weekly food shop.
Calculations from wealth manager Quilter suggest an adult child living at home can cost more than £3,200 a year.
If a child returns from university aged 21 and remains at home until turning 30, the additional cost could reach £28,800.
Those costs can include food, heating, water and other household expenses. These can be more difficult to manage when an adult child is unemployed or cannot make a meaningful contribution.
Each situation is different.
Some contribute towards household bills or pay a form of rent, while others may be unable to do so because they are out of work.
The distinction is important for parents who are simultaneously managing their own financial commitments. Supporting an adult child can mean less money available for saving, home improvements, holidays or retirement.
Jacqui Baker of accountancy firm RSM says families with children living at home, including adult offspring, are experiencing a particularly sharp squeeze on their spending power:
“When families come under pressure, the ripples are felt across the retail sector.
“That is the challenge facing retailers like John Lewis.
“When older children are still living at home, it is not just about the food bills and the utility bills, it’s all the uncertainty about when or whether they will be able to move out.”
That uncertainty can be significant. A parent who expects their child to leave within six months may make very different financial decisions from one who believes they could remain at home for several years.
One parent admitted that the costs became significant enough to encourage their 25-year-old son to move out.
Rather than continuing to have him living “on the meter” at home, they decided to pay half his rent.
“That’s an extra £400 a month we have to find.”
The situation can also force parents to reconsider their longer-term plans.
Holly Mackay, founder and chief executive of consumer finance website Boring Money, says parents with younger children or teenagers may need to reassess assumptions about their finances in later life.
That could include considering whether retirement needs to be delayed if adult children remain financially dependent.
Mackay also recommends that parents establish clearer financial expectations once children are earning:
“People need to be having a very frank conversation with their children about paying rent, even if it is only a token amount.”
She suggests parents could also open a Lifetime ISA for children who remain at home, allowing them to contribute towards an account that receives a Government bonus.
Why the Bank of Mum and Dad matters to Retailers
The financial impact does not stop at the family home.
If parents are putting more money towards essentials, less is available for discretionary spending.
Financial advisers Key Equity Release estimated that adult children living at home could collectively cost families as much as £17 billion a year.
Much of that money is spent on supermarkets, water and heating – expenses that have to be covered regardless of whether the person paying them is 15 or 25.
As a result, less money is available for clothes, beauty products, home improvements, meals out and other non-essential purchases.
RSM data illustrates the shift. Spending by families with children at home fell by 25% on clothing, 16% on health and beauty and 13% on home and garden.
That helps explain why the issue has attracted attention from retailers as well as economists and financial advisers.
Peter Ruis, the outgoing managing director of John Lewis, identified “re-nesting” as one factor affecting consumer spending as the retailer reported sales falling 2% in the first half of the year.
He said: “I’m someone with graduate and teenage kids. I read that there were 10,500 graduate jobs, down from 60,000 just five or six years ago.
“A lot of our key customers in their 40s and 50s are worrying about their kids and having them at home.”
For retailers, the concern is that nobody necessarily knows how long that spending will continue.
A young adult who stays home for another year may affect household spending differently from one who remains there for another five or ten years.
That makes the “re-nesting” trend difficult for families, and businesses, to plan around.
The wider issue ultimately comes back to two pressures young adults cannot easily control: the cost of housing and the availability of suitable work.
As long as rents remain difficult to manage, deposits are hard to save and the graduate jobs market remains constrained, living with parents will remain a practical financial choice for many.
The ‘Bank of Mum and Dad’ is therefore no longer simply a stopgap between childhood and independence.
For a growing number of British families, it is becoming a much longer stage of adult life, with financial consequences for both generations.
