personal finance

Moving back home may not be a millennial money saver


Shortly before I left university last year, a friend and I discussed how much money we had agreed to contribute to family household costs once we started work. At the time, it didn’t strike me as unusual in the slightest to be talking about putting cash in the family pot.

It is common for young people in the UK to live in the family home after graduation, even if employed. Many are looking to keep their expenses down and save for a mortgage. But there is too often an unfounded assumption that all young people can save money simply by living at home — with no obligation to contribute financially or by paying rent.

Coronavirus has brought this issue into sharper focus. One-fifth of people questioned in a nationally representative survey in June had either moved home or had children move back in with them since the pandemic, according to comparison website Finder.com, which commissioned the research. Just over two-thirds said the move was permanent, and a quarter said they no longer needed to pay rent on their previous property.

While the pandemic has shaken job prospects and finances for many young people, for some it has also opened up an opportunity — perhaps limited — for “forced saving” by cutting back on travel costs, extracurricular activities and, in some cases, rent.

But the events of the past few months have also highlighted disparities among young workers in their ability to put money aside in this way. Many are from families who rent, not own, their home, or immigrant families with relatives in other countries to whom they send remittances. In some developing countries Covid-19’s effects have been especially acute.

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Others may have no familial safety net at all and must depend solely on their own efforts to pay living and housing costs. Making savings in any of these scenarios is not straightforward, when compared with those who can live at home and pocket the majority of their newfound savings.

One commenter on an online forum where the topic of household contributions was being discussed exclaimed: “My mum isn’t a bloodthirsty pirate”. It is hard to imagine such a remark coming from anyone who grew up in a household where cash was not always available. It is also clear that many working adults living at home still regard it as a parent’s responsibility to finance them, accentuating a privilege that is taken as much more normal than it ought to be.

A friend of mine on a graduate salary of £30,000 noted that while many graduates moved home, gave up their shared flats and decided to save by not paying rent, that option was not open to her, since her childhood home lacked familial stability. She spends about £900 on rent while still also occasionally contributing money to her family and siblings.

Millennials or Generation Z face more challenges than their predecessors to get on to the property ladder. But some are able to save significantly less towards a deposit than others even if apparently on equal terrain.

Ethnicity is one factor, with official home ownership rates showing marked differences between groups. In the UK, Arab and black African households are least likely to own their homes, with the shares standing at only 17 and 20 per cent respectively. By comparison, Indian and white British households have ownership shares of 74 and 68 per cent respectively.

Contributing to household costs or being obliged by family circumstances to rent elsewhere were problems for many young people well before coronavirus. People moving out of lower socio-economic backgrounds typically face disparities that their peers will not. They are likely to have fewer obvious sources of help, for example, in mastering financial literacy or entering and navigating professional spaces.

It is not surprising to see a growing prevalence of “side-hustles” — projects alongside mainstream work that provide an extra stream of income. It is often ambitious first-generation graduates and young workers in general who looking to increase their cash flow and continue to help their families financially when necessary.

I will add that financial contributions at home are rarely compulsory. For myself, I choose to contribute whenever possible because the costs of living alone would be far greater than my current contributions to my guardians. I am also able to help loved ones in remote areas, who need help at this difficult time.

For many of my peers, helping in this way serves as a reminder of our progression into a more stable situation — that years of work and parental sacrifices are paying off. It also highlights the very different financial realities within our demographic, even among those doing the same jobs.

The rhetoric about millennials facing daunting challenges in the jobs and housing markets is only likely to grow louder in the wake of the pandemic. But these issues will remain particularly intractable for those who are not backed by parental help. We need to resist casting all millennials as equal in the face of the approaching economic storm, since some are much better positioned to withstand it than others.

The author is a former Maisie Hylton Fellow at the FT. Twitter: @LHarryDavis





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