The older generation can suffer financially by allowing their adult children to live at home, experts say. (File photo) Photo: 123RF
It is becoming more common for young people to stay living with their parents for longer - but it can be an expensive mistake for the older generation, one retirement planning expert says.
The number of households with adult children has grown by more than 100,000 since 2004 - the fastest growth of any type of household.
We have crunched the numbers to look at what it might be adding to the household bills.
In some cases, having extra adults in the house can add thousands of dollars a year.
Otago University researchers estimate the cost of food around the country each year. Their most recent estimates show that at a national level, a man with a "moderate" food budget might eat about $115 worth of food a week. A woman would eat about $98.
With a more liberal budget, the man might spend $149 and the woman $127. The cost varies a little around the country and tends to be slightly less in Auckland than in Wellington, Christchurch and Dunedin, the research shows.
Data from the Household Economic Survey shows that households that are described as "couple only" spend $280 a week on food, compared to $405 for couples with two children.
Power
Paul Fuge, general manager of Powerswitch, says the amount that an extra person might add to the power bill is difficult to quantify but in Wellington, with a fully electric home, it might be about $1100 a year.
"Adding more people is not directly cumulative to the overall household cost as some consumption is in common ... it depends on the extra person and what they are doing. A new baby can increase costs more significantly for example than, say, an additional flatmate that's out during the day due to higher washing and home heating requirements."
Housing
If having adult children at home with you means you cannot downsize your home in a way that you might have otherwise, to free up cash, that could have an impact.
CoreLogic chief property economist Kelvin Davidson says at a national level, the difference in median value between a three-bedroom and four-bedroom house, for example, is just under $330,000.
It is just under $400,000 in Auckland and $236,000 in Wellington.
The HES data shows that couples alone spend $367.70 a week on housing and household utilities, compared to $539 for couples with two children.
"The problem of adult children relying on parents for financial support is a widespread one that affects people at all stages of life - both before and after retirement," retirement planning specialist Liz Koh, of Enrich Retirement, says.
Sometimes there are legitimate reasons where people can expect their parents to provide for them, but it can verge on "emotional blackmail or even a form of financial abuse", she says.
She has seen people who have a job and refuse to pay board to their parents, as well as young couples living with parents to save for a house deposit, or people returning to their parents' house after a relationship breakdown.
"There are many more scenarios. The key issue here is whether these situations are affordable for the parents. In many cases they are not.
"It's not just about money either. For example, I am aware of a widow in her late 80s who really needs to move into a retirement village for health reasons, but is reluctant to do so because her 62-year-old son, who is unable to buy his own home, lives with her.
"Parents need to encourage their children to be self-sufficient as much as possible otherwise they will not learn the skills they need to succeed financially later in life when the parents are no longer around. A basic principle to stick to is that parents should secure their own financial futures before helping their children, otherwise they will be unable to help their children at a later stage."
Koh says people who have been collecting NZ Super as a single person living alone could also find it reduced if their adult children move back in.
Economist Shamubeel Eaqub says some parents opt to allow their children to stay with them instead of helping them with a gift of money outright for a house.
"It's like the pragmatic version of the 'bank of mum and dad'. If you don't have money to give what do you do? You let them stay in your house where the rooms are empty, anyway."
He says sometimes parents' costs can be reduced if they are charging their children enough board to offset the food and power costs.
"They might be spending less out of their own pocket if they're charging for it, which we can't tell."
He says pooling resources sometimes gives people more choices.
There are economies of scale - some basic costs associated with setting up and running a house will not double if the number of occupants does, he says.
Massey University school of psychology acting head Kirsty Ross agrees that people who charge their children board can offset the costs to a degree.
Sometimes the decision will be informed by their values and cultural beliefs about where parenting should stop, she says.
"Some people, and I place myself in this category, when my kids have been at uni, that is their job but they're not earning anything so I will help to offset some of the expenses, the dentist, that sort of thing. Those are times when I think as a parent you need to make a decision around that aspect of parenting."
She says some households also rely on the income from the younger generation to get by.
"There are so many different makeups of the way that could go, there are things that could drive it that are purely economics - who's working and who's adding to the household income, who's drawing from the household income - then there are beliefs around their role as a parent."
She says it is important that parents have open communication and discuss things before they become a problem. Money and parenting are some of the main things that people argue about as couples, and when kids are staying at home longer, it can potentially mean those stressors combine.
"It's important to have conversations between the parents around what do we, as a couple, believe, what expectations do we have… for the harmony of the unit."
She says young people who are paying board might expect to have a say in how the supermarket budget is spent, for example.
"There are huge benefits financially but also emotionally from having intergenerational families live together longer. As long as it's discussed and people are able to kind of have ongoing conversations around initial expectations and then reviews around 'how's this working, is this working for us, do we need to tweak anything' and all that sort of thing."
