Dis­cover if your adult child truly can’t af­ford to move out

George Herald - Private Property - - Property News -

Ac­cord­ing to Old Mu­tual's Sav­ings & In­vest­ment Mon­i­tor for July 2018, ap­prox­i­mately one in two peo­ple aged 18 to 34 live at home with par­ents. As a par­ent, that means you have a 50/50 chance that your teenager is go­ing to grow up into a real-life Peter Pan who chooses to run away from adult re­spon­si­bil­i­ties for as long as they can.

"The dis­crep­ancy be­tween en­try-level salaries and the ris­ing cost of liv­ing is widely ap­par­ent. It is not easy for young adults to take the plunge and ven­ture out on their own. At the same time, it is be­com­ing equally dif­fi­cult for the 'sand­wich gen­er­a­tion' to con­tinue sup­port­ing both their adult chil­dren as well as their age­ing par­ents who are liv­ing longer than they were fi­nan­cially pre­pared for. At some point, par­ents also need to start in­vest­ing more into their own re­tire­ment so that they don't later be­come a bur­den to their chil­dren. Un­less your adult child is con­tribut­ing to­wards rent and house­hold ex­penses, it might be ben­e­fi­cial to both your­self and your chil­dren to en­cour­age them to find a place of their own," sug­gests Adrian Goslett, re­gional di­rec­tor and CEO of RE/MAX of South­ern Africa.

"The prob­lem lies largely with adult chil­dren who grew up in mid­dle and high-in­come homes. Ac­cus­tomed to cer­tain life­styles, it is more chal­leng­ing for these young adults to set­tle for less than they are used to. If they were to ad­just their ex­pec­ta­tions, they would dis­cover that it is pos­si­ble to live on much less than what they had been liv­ing on at home," says Goslett.

The most com­mon rea­son young adults cite for not mov­ing out of home is that they can­not af­ford to. While this might be true for some, par­tic­u­larly those un­der the age of 25, it is cer­tainly not true for all.

"If you know where to look, you can get away with around R5 000 in monthly rent for bach­e­lor flats and house-shar­ing op­tions. Many rentals in­clude wa­ter and elec­tric­ity costs, so other ex­penses would only in­clude things like gro­cery bills, which you can bud­get at around R1 000 to R2 000 for one per­son, de­pend­ing on buy­ing and eat­ing habits, and fuel / trans­port costs which will vary from per­son to per­son.

You would also have to fac­tor in any debts you might have, such as stu­dent debt and car loans. If you do the maths, any­one clear­ing over around R10 000 a month would be able to af­ford the costs of liv­ing on their own. De­pend­ing on how cosy things were for them at home, they might just need to ad­just their life­style ac­cord­ingly," says Goslett.

"For those who pre­fer to live at home un­til they are able to af­ford the costs of pur­chas­ing prop­erty, they need to wait un­til they earn a min­i­mum of around R15 000 per month af­ter tax.

“This will af­ford them a home loan of around R500 000. Ad­mit­tedly, this does not af­ford a per­son much, but it is pos­si­ble to pur­chase a small apart­ment or a fixer-up­per for this amount if you know where to look. How­ever, young buy­ers will have to keep in mind the bond, trans­fer and ini­ti­a­tion fees that go along with such a pur­chase, which would cost them just over R30 000 on a R500 000 prop­erty," says Goslett.

"Young adults need to re­mem­ber that their par­ents did not start where they are to­day. In all like­li­hood, their par­ents bought a cheap apart­ment in a less than ideal part of town and slowly climbed their way up from there. This is the great thing about in­vest­ing in prop­erty. Even if all you can af­ford is a small stu­dio flat at first, by the time you sell, your prop­erty will likely have ap­pre­ci­ated enough in value to af­ford you a much nicer home. All it takes is pa­tience and the cor­rect real es­tate pro­fes­sional to help you make wise in­vest­ment de­ci­sions with your pur­chases."

It is be­com­ing equally dif­fi­cult for the ‘sand­wich gen­er­a­tion’ to con­tinue sup­port­ing both their adult chil­dren as well as their age­ing par­ents.

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