IS YOUR LOW-PAID JOB SHRINKING YOUR PARENTS’ PENSION POT?
The average parents of today’s young adults are shelling out £15,490 per ‘child’, as their offspring continue to need financial help well into their twenties. One in three parents admits they are currently forfeiting long-term financial planning for the sake of their children’s immediate needs.
New research — conducted by savings and investments company Standard Life — found that parents are currently supporting their over-18s with expenses such as university costs, debts, plus help with wedding costs, a flat deposit and other general living costs, as their young adult children struggle to make ends meet thanks to high unemployment, low-paying jobs and the soaring cost of living, including sky-high rent.
And researchers pointed out that the true scale of their parents’ sacrifice is even greater than £15,000. If that sum was invested into a pension pot it would be worth far more to their parents in the future. In 20 years’ time it would amount to £38,500 for a basic rate taxpayer, or £15,380 for a higher rate taxpayer. This means that a higher rate taxpayer with two children could be foregoing £100,000 from their pension pot in order to tide over their grown-up children now.
Standard Life’s spokesperson John Lawson said:
“A parent’s desire to provide for their children even when they become young adults is increasingly coming at a huge cost to their own future financial security. Our research highlights the significant financial challenges facing parents, whether to secure their long term future or meet their family’s immediate needs.
“The high level of unemployment among young people can only be exacerbating the problem. There’s no doubt that many more adult children will be relying on their parents for support which must be a real worry for many parents. Some may even be returning to the nest as they are made redundant or fail to find work.”
The question of how ‘adult’ graduates feel has been raised several times in recent weeks on Graduate Fog. These new figures appear to show that those of you who still don’t feel truly independent have a good point.
Much of the government’s plans for tackling graduate unemployment seem to involve keeping you financially dependent — whether that’s your parents or the state — for hand-outs. But that’s just not good enough.
This government must do much, much more to help young people find proper jobs that pay wages you can actually live on, rather than herding you into low-paid apprenticeships, unpaid internships and work experience schemes. For your sanity — as well as your parents’ bank balance — you need to be earning your own money so that you can pay your own way.
*DO YOU TAKE HAND-OUTS FROM YOUR PARENTS?
What is the money for – and why can’t can’t you pay those costs yourself? How does it make you feel when you’re forced to ask your parents for money?
I can’t afford to have a pension, let alone pay more than my bills, so unfortunately with my little one, I doubt that in the future he will be getting very much from me at all. Being stuck in a low paid and low skills job for a number of years has eroded my self-confidence and employability.
Just found out we are in recession again – what joy!
This is an interesting article, particularly when you consider it with the caveat that a lot of those parents will have voted for this Government and the previous one.
I acknowledge this problem, and try to limit the blow. I’m 23, I live at home, I have a full time job, and using the money from that job I self-fund a postgrad and all my own food, socialising, etc.
I’d like to think that, presently, I’m not costing that much… I don’t ask for money.
But I know some graduates or undergrads who live out, and their parents are actually releasing equity in their homes to fund their children living away. Their children will work while they’re at uni. There’s two sides to every coin, I think. And averages can tell lies.
This is slightly annoying as I have never asked my parents for money. I worked 4 days a week at uni to ensure I could afford my rent and living. I now live in London in a full-time job and have not asked my parents for any money. They could simply not afford to help me with my own living, a deposit for a flat etc… If this is wealthy families I would understand, but the average family? No way.
I’m 24 and don’t live with my parents. I never ask for money – occasionally, my mother takes me food shopping which really helps me out as I don’t earn much, but there’s no way they could pay my rent or bills and I wouldn’t ask.
My mother retired at 60 and admitted that she’d considered continuing to work for another five years to help me throughout university. I’m glad she didn’t, though – I did struggle, but it wouldn’t have been right. I know a few people who live off hand-outs from their parents, but the majority of my friends either live away from home, or contribute to the family home with their earnings. Sometimes, it’s the other way round, as children feel they can’t leave their mother or father to maintain the rent or mortgage on a low-paid job so they stay at home to help make ends meet.
I live at home with my parents- I could live away from home though I think I would only just make ends meet what with the cost of rent being so high.
I live at home and save every penny I earn (I work full-time) to put towards a deposit for a house- at first I felt so guilty, but my parents have said they feel it is more cost effective having me at home, than me struggling on my own and risking having to have them bail me out. They say it is no different than when I was younger-they do the food shop for all of us- bills are the same-if I want anything else I get it myself.
It would be pointless me living away from home at the moment, as my wage is so low that I wouldn’t be able to save at all, so I would just be in a vicious cycle of working to live and never being able to move upwards in life (unless of course I got a better paid job!!).
I think I am very lucky though- I know plenty of people whose parents would have them at home for free if they could afford it, but they simply can’t.
Would parents have a Pension Pot ? Since the mid 1990’s, Pensions have become increasingly viewed to be a redundant exercise in futility, and potential investors opted for Substitution Investment – such as property and Buy To Let Mortgages.
Todays parents may well have paid over £15,000 per adult child… but, conversely, may have made £Millions from their property dealings, and saved hundreds of £’000 in lower than expected mortgage payments through artificially low interest rates.
I’m a graduate (5 years out now) earning a decent wage (~£33k) and I still live at home. The PROBLEM is the COST OF HOUSING. People don’t get it, even ‘smart’ graduates. Is it good when food goes up in price, or petrol, or the cost of a postage stamp, when your wages are small and not rising at the same rate? NO!! So why are expensive homes a good thing? You hear it in the news all the time – joy as house prices go up! It is NOT a good thing! I don’t WANT to have a 25 year mortgage on some flat that costs a fifth of a MILLION pounds… over 25 years the interest added to that would take it to HALF A MILLION POUNDS!
Unfortunately there are large vested interest groups in the UK which will do anything to maintain high property prices. It is economically destructive. Higher rents means less profit for business – staff also have to be paid more in order to have a decent living wage. Higher wages is less competitive as workers from the East work for much less. Who gets the jobs?
Personally, I’m staying at home for the moment with an eye on moving out of the UK. I pay a reduced rent to my parents – much better than giving it to some two-bit landlord. Rents are extortionate. Mortgages are a con at current house prices. We’ve all read the stories about first-time buyers being 35 years old now. Then what… you’ll be 60 before the mortgage is paid, off… and most likely skint.. what about pension and having fun? Many I know put off decisions like having kids as they just can’t afford it.
In general, we’ve been shafted. The good times have been had and we’re all meant to pay for it now. Who in their right mind would move out of home to be debt servitude to a bank for the majority of their lives? My aim is to be able to pay a mortgage off within 10-15 years of starting one. That’s how it should be. I mean look at the quality of modern houses nowadays – absolutely tiny (some of the smallest in Europe), paper-thin, crammed in… it’s a total rip-off! What do people think anyway… tha that house prices only ever go up? Will a 1-bed flat cost £10m in 10 years time? Buffoons! Even worse are parents who complain about the state of things, but when asked if they (and everybody else) would take a hit on their property ‘value’ so that their offspring could have a decent financially secure life… they say no! Go on, ask!
What’s the conclusion? Well, I’d urge you to do the same as me if you’re lucky enough. Stay at home and save. Big time. If house prices still cost a fortune, just look at going abroad – your life will be enriched for it.
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