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