'Empty nester' age concern

Children returning to the parental home to live is a serious concern and causing new scenarios that need to be addressed in financial planning, including cashflow assumptions, says Jacqueline Lockie CFPTM Chartered FCSI, CISI head of financial planning

empty nest
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I’m a numbers buff. That interest, combined with a wish to help people out of their financial muddles, helped me find paraplanning. 

So, it was with interest that I read a BBC article in March about the effects on ‘empty nesters’ (parents whose children have all left the family home) who welcome back returning adult children in financial difficulty.

Research conducted by the London School of Economics and Political Science looked at data from European families across 17 countries with parents aged between 50 and 75. The research measured quality of life and wellbeing across four areas: control; autonomy; pleasure; self-realisation; and finds that when adult children return to the family home, the parents’ overall quality of wellbeing reduces. In some cases, quality of life scores fall so much that the effect is similar to developing an age-related disability, such as difficulties with walking or getting dressed. Wow!

This is significant to me and it also has an impact on financial planning for clients. Paraplanners should consider the impact of this when running scenarios and writing financial plans for clients. It might also be worth having a chat with the planners you work alongside to discuss this research and ask them to incorporate extra questions when talking to clients about longer-term plans. I would certainly be concerned for those empty nesters who are already in poor health, because adding in the potential impact of returning adult children, also for longer periods of time than in the past, could have a significant impact on their already poor health.

If you can plan far enough in advance with clients and ask questions to get them to think through what they might do if an adult child’s plans change, perhaps due to relationship breakdown, you can explain the potential impact on their quality of life before that scenario plays out. They could then be better prepared, both mentally and financially.

Planning for this scenario
Could your clients plan to buy a flat for their children to rent from them? Should they set aside extra emergency money to cater for this? Mentally, they would need to be comfortable spending it if the need arose in order to maintain their wellbeing. Some families won’t be able to afford to do this, some might see it as part of their duty as a parent to welcome their adult children home in any circumstances, but all in all, I think some of my clients would have benefited from having the chance to think about this.

The research paper, published in the journal Social Science & Medicine, says: “Over the past half century, intergenerational co-residence has declined dramatically in Western countries. However, this pattern has recently altered, and in some countries multigenerational co-residence has increased; a shift interpreted as a family response to high unemployment rates, poor job prospects and financial hardship among young adults.”

Some of these interpretations in the research could also affect the assumptions you might wish to use when running cashflow planning scenarios, eg, what can parents do, perhaps at an earlier stage in life, to improve their children’s employment prospects? Can a private education be funded and is this likely to help? Can the parents afford to save more to help their adult children with financial hardship?

As we know, with university fees rising and student debt at near record levels, the younger generation of the workforce is struggling financially. Add in other factors, like the ever-increasing divorce rate and macroeconomic factors, this scenario may become more likely in the years to come. And your clients might just want to consider some of these longer-term issues for their own family. This is just one new area where your financial planning firm can really be of value at all sorts of stages of life. Food for thought.

This article first appears in the June edition of Professional Paraplanner. Republished with permission.
Published: 10 Jul 2018
  • Financial Planning
  • paraplanning
  • Professional Paraplanner

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