An American survey has found that 62% of young adults between the age of 19 and 22 rely on their parents for financial assistance. Jason Garner, management consultant at acsis, said South Africa is probably mirroring this trend, as it was recently reported that the number of unemployed youth (age 15 to 24 years) in South Africa jumped by 126,000 (9.9%) in the first quarter of 2012 from the fourth quarter to 1.393 million. He advised that parents build this additional expense into financial plans going forward, on top of the other necessities they save towards, such as retirement and tertiary education savings.
Garner added that in South Africa, many young adults are not finding jobs after high school or university in order to assist themselves financially, thus relying on their parents for longer than originally planned. As youth unemployment will continue to be an issue for years to come, it is necessary for consumers to start planning for this additional expense earlier in life, to protect themselves financially.
“If not, many will find themselves spending their hard earned retirement savings trying to support themselves along with children who they did not plan to support after a certain time period. As we are currently experiencing a low return environment, financial plans should be regularly reviewed to ensure that this significant additional expense is correctly planned for.”
Garner warned that parents could find themselves in financial trouble if they don’t cater for the possibility that children will be leaving the nest later in life. “Parents who did not plan to support children for longer than originally expected are more than likely to find themselves in major financial trouble if the situation is not properly planned for. Not many families can withstand a long-term drain on assets that probably already took a blow during the market meltdown of a few years ago.”
He warned that adults who still live at home and are neither working nor studying are a worldwide phenomenon, and can affect economies negatively if it continues. “In the United States the situation where parents are left struggling to support children who return home laden with student loan debt and facing few job prospects has been labelled ‘full nest syndrome’.
“This situation highlights the need for financial planning that is appropriate for the type of financial climate consumers are currently experiencing. A planner plays a vital role in helping clients analyse their current situation and determining how to articulate their life and financial goals appropriately. Consumers need to ensure that financial plans are correctly created for their individual needs at a specific point in their lives. For instance, parents that anticipate children will not be moving out soon or will be returning after college or university need to plan and save accordingly,” concludes Garner.