by Mark Johnston
Whether it’s a well meaning family member, the new, TV programs or the internet, it seems we are awash with people telling us how hard it is to bring up a child. Putting parental difficulties to one side, most people will agree that it is expensive. A recent survey showed that a newborn child costs around £18,000 in their first year alone.Fast forward 18 years and it’s our children that are struggling financially. Research carried out by the Financial Services Authority has suggested that the cost of a young person in the United Kingdom to have financial freedom from their parents is just less than £14,000 a year. The FSA pointed out that its more than twice the amount that young people budget for.
Many of the young people surveyed believed that they would not achieve financial freedom until their 30’s. Of the 40% that believed this most cited the lack of good jobs or graduate placements as the reason as well as the high cost of getting onto the UK property market.
Currently, young would-be home owners need to find at least a 15% deposit if they are to get any sort of decent rate from their mortgage provider. With Average house prices hovering around the £160,000 mark, a first time buyer would need around £22,000 to get on the property market which is about the current average annual salary of a Brit today.
Many young adult look to achieve financial freedom by the time they are between 22 to 24 but many stay at home for much longer than that. Some are still at home well into their 30’s as there is less responsibility and its cheaper than them starting out on their home. Free rent, food, cleaning all add to the reasons why children are staying at home longer, although interestingly more males fit into this category with females flying the coup at a lot younger age.
Other young adults will leave home, usually to go to university but then come back because home because they can’t budget. This situation is becoming widespread and has even coined a phrase “boomerang kids”.
Bank and Building Societies have already seen the trend in “stay at home kids” and are starting to provide products that allow them to take the next steps of being able to buy a house but with their parents help.
One of the main reasons young adults are staying at home longer is that following the financial crisis, mortgages have become harder to get and too expensive for young adults just setting out in life. Lloyds are offering what they are calling a “Lend a Hand” mortgage which allows young first time buyers to tap into their parents savings.
The new offer will offer first time buyers mortgages with just a 5% deposit. The bank then looks to parents to secure a further 20% of the property value through their savings which is held in a special account but continues to pay interest (currently 2.*% after tax or 3.5% before tax).
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