‘Comeback kids’ a headache for parents
There could be one in your extended family, perhaps even under your roof. Years ago, they flew the nest, obtained a qualification, possibly travelled and/or started working. But then they came back home to live with – or off – you, their folks. They are the “boomerang generation” – young adults in their 20s and early 30s living with their parents.
Richard Sparg, a chartered accountant with a Certified Financial Planner accreditation at Netto Invest, says “boomerangers” are a worldwide phenomenon and the main reasons for the trend are economic. The reasons include youth unemployment, declining middle-class incomes, the diminishing advantage of a degree, the high cost of property, and affirmative action.
* Youth unemployment. In Spain, unemployment among the youth is reportedly over 50 percent. In the United Kingdom, more than one million under-25s are unemployed, and three million people between the ages of 20 and 34 are living with their parents. In 2001, Canadian census figures revealed that 41 percent of children aged between 20 and 29 lived with their parents, compared with 27 percent in 1981.
Statistics SA recently started to record information relating to young people who are not in employment, education or training, Sparg says. In the Quarterly Labour Force Survey published at the end of last year, Stats SA reported that 31 percent of South Africans aged between 15 and 24 were not studying or in training or working.
* Declining middle-class incomes. In Western countries, middle-class incomes have been slowly declining since the 1960s because of factors such as the outsourcing of jobs to Asian countries and advances in technology and mechanisation, Sparg says.
* The diminishing advantage of a degree. A university qualification no longer guarantees a job, Sparg says. Each year, an increasing number of graduates enter the market, and professional bodies often restrict their entry into professions.
* The high cost of property. Property has become more unaffordable for the first-time buyer, Sparg says. This is owing to the scarcity of land and increasing urbanisation worldwide.
* Affirmative action. Sparg says this isn’t disadvantageous to everyone. The number of black university graduates increased from 8 514 in 1991 to 30 970 in 2008, according to the SA Institute for Race Relations. This is due to the affirmative action policies of many universities, which favour the economically disadvantaged.
The impact of the changing global economy on young lives is significant, Sparg says.
According to findings by the Pew Research Centre in the United States, 35 percent of adults aged between 18 and 34 in the US have gone back to study, 24 percent have taken an unpaid job, 24 percent have moved back in with their parents, 22 percent have postponed having a baby and 20 percent have postponed getting married.
Bleak as this may sound, the research found that only 25 percent of those living with their parents felt it was “bad” for the relationship, 24 percent said it was “good” and 48 percent said it made “no difference” to the relationship.
Levels of optimism among US boomerangers is surprisingly high: 83 percent of those who don’t have enough income now reckon they will in the future.
Although some nasty labels have been given to this group – names such as “parasite singles” and “fridge raiders” – when asked about the contribution they make to the home, 96 percent say they do chores, 75 percent say they contribute to household expenses, and 35 percent say they pay rent.
Sparg says some of the positives to the boomerang phenomenon include increased family time and closer-knit families, but there are undoubtedly negatives. A culture of dependency and entitlement can develop, relationships can be strained in the absence of sufficient space and independence, and children may find it more difficult to establish a long-term relationship with a prospective life partner from the confines of their parents’ home, Sparg says.
But it is the parents who pay the biggest price, he says. Hidden costs, such as those for extra food, water, electricity and fuel, can have a big impact on your finances, which, in turn, could affect your retirement plans.
“For example, the opportunity cost (the cost of a lost opportunity to save) of spending R3 000 a month over a 10-year period – at a six-percent real return – is close to half a million rand.”
Having an adult dependant at home could also delay your scaling down to a smaller house that could free up capital for investment at an important time in your life.
Sparg says things for parents to watch out for with boomerang children include:
* Medical scheme risk. Given the late-joiner penalties that apply when joining a scheme when you are over the age of 35, sympathetic parents may be inclined to provide medical cover to boomerang children – at great expense.
* Disability risk. Suddenly having to support a dependant with a disability could decimate your retirement savings.
* Signing surety. Beware of signing surety on your child’s loans, especially one that is open-ended.
* A lack of budget skills and financial literacy in children who are not independent.
* Potential sibling tension or resentment. This may necessitate an adjustment to your will by, for example, reducing a boomerang child’s inheritance by any loans or money spent on him or her over a certain period.
BOOMERANGERS NOT ALL THE SAME
Richard Sparg, a financial planner at Netto Invest who has a keen interest in the subject of boomerang children and the impact they can have on their parents’ finances, says not all of these “adultescents” are the same. Understanding them can help you to help them.
Your boomerang child may be:
* Discouraged. A set-back, such as the loss of a job or a relationship, can be demotivating and even cause depression. Parents should be patient and offer appropriate encouragement, Sparg says.
* Ill-equipped. Children who have inadequate coping and problem-solving skills can become frustrated and angry. They may be lacking these skills because their parents have been too quick to help them in the past. These children might need help finding their vocation or need skills training.
* Lazy or free spirited. If your child sees adulthood as limiting to their freedom, he or she may be resistant to settling down. You can help them by setting clear boundaries and deadlines.
HOLD BACK ON THE CASH BUT BE GENEROUS WITH MORAL SUPPORT
If you have a boomerang child – an adult between 20 and mid-30 who has moved back home – there are no easy answers, Richard Sparg of Netto Invest, says.
Sparg offers the following pointers on how best to parent such children:
* Accept parental responsibility. Remember that your ultimate objective as a parent is to prepare your children for permanent independence, he says.
* Put appropriate boundaries in place. Don’t always take responsibility for an adult child. Consider limiting yourself to “three saves” for any child after the age of 20, Sparg says. One “save” may be to provide accommodation for a fixed period when your child returns after a gap year. Another might be settling their credit card debt to prevent them from getting a bad credit record.
* Provide wisdom, expertise and fortitude, but preferably not money.
* Ensure that you give your boomerang child responsibilities but avoid house rules that apply to adolescents, such as curfews.
* Home should not be a sanctuary where your child can hide from the real world, but rather a safe harbour to retool and repair, Sparg says.
* Draw up an exit plan, but don’t plan further than two years ahead. Sparg says an exit plan specifies who is responsible for what action and over what time period, and the consequences if the action is not met. Ideally this should be initiated by the child. Collaboration between child and parent is key, he says.
* Be creative. Sparg says you may want to retain your child’s rental contributions for a future deposit on his or her first property. Or you might agree to match whatever they save to give them an incentive to save.