Is debt driving a trend to multigenerational households?

Debt and multigenerational households

Is debt driving the trend to multigenerational households?

Young people are finding it tougher to find work and are increasingly hit hard by adverse economic conditions.

The current unemployment rate for young people in Australia is around 12% but in some parts of the country that figure is up to 20%.

The worst-hit areas of youth unemployment tend to be where industries are in decline.

In addition, growth industries and competitive businesses place a premium on education, qualifications and work experience.

The unemployed can either look for a new job, move away from the area or undergo additional training. Many young people will choose to study for longer rather than risk joining the unemployed in increasing competition for jobs.

And, not only are university students entering a worsening job market, they are also carrying high debt rates when they finish their studies.

A nationwide survey last year of almost 12,000 students found debt levels on average were $36,000 at the time of finishing studies and that those from low-income backgrounds were most at risk of financial stress during their study.

Rising house prices mean that mortgages are higher and fewer people are able to afford a better home or to enter the property market.

A Pew survey conducted in the USA in 2012 found that most people believe that young adults today have a harder time than their parents did to find jobs, save for the future, pay off their student debt and buy a home.

In reality, the combined forces of high youth unemployment, labor-market erosion, rising house prices and educational costs put independence for many young people out of reach.

This can have the affect for young people of delaying certain life stages like marriage or having a baby.

More young people are turning to their parents for a helping hand and perhaps this is fueling a growing trend to multigenerational households.

More and more parents are opening the family home to reabsorb adult children who are suffering financial stress or simply finding it hard to get ahead.

And it is not just tight finances that are driving this trend.  Young people find that they have more choices if they are sheltered under their parents’ roof.     They are more likely to have discretionary income so that they can enjoy a higher life style, travel more, save more and continue to further their education.

In the developed world a growing number of people in their 20s and 30s have never been independent.   In Italy 37% of men aged 30 have never left the family home and in the USA there has been a 50% increase since the 1970s in the proportion of people aged 30 to 34 years who live with their parents. In the UK and in Australia around 25% of 20 to 34 year olds continue to live in the home of their parents.  Spain, Japan and other developed countries are also following this trend.

Multi-generational households were once the rule and not the exception.   The advent of nuclear families in the 1950s came about because of increased prosperity and a thriving middle class.   But rising unemployment, house prices and education costs,  along with stagnant wages and increasing debt; mean that for some the nuclear family no longer makes sense.

And it is not just young adults that are helped by multigenerational living arrangements.   Parents and grandparents find that companionship and avoiding an empty nest has many positive emotional outcomes.

There are also many economic advantages to the multigenerational household.   These include sharing the cost of rent or mortgage and utilities, less need for child care if a grandparent is home to look after the children and having more people to share the load of household chores.  There are also more household members to take care of grandma so that she doesn’t have to go to a nursing home.

Overall, moving in with relatives has several benefits and studies have shown that the multigenerational household poverty rate is substantially lower than that of other households.

While living with family can be challenging, the benefits and advantages can provide a lifeline for many, particularly young adults.

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