Child-rearing costs are putting parents over 60 in debt

By Marianne Curphey

A rising number of people nearing retirement are struggling with debts from supporting their teenaged and adult children financially, a new report reveals.

The debt management charity StepChange says it has seen an increase in the number of people over 60 years of age who have dependent children and are seeking help with debt problems. The organisation reports that in 2012, 627 of the over-60s who sought the charity's help still had children who were financially dependent on them. That's a 50 per cent increase from 2009. 

Average debt (excluding mortgage) among the over-60s seeking with dependent children amounted to almost £33,400 per couple, compared to £27,788 for a couple in their 60s with no dependent children, according to StepChange. parents-over-60

The average debt of a single person in their 60s with dependent children was £17,838, compared to £16,540 for a single person in their 60s with no dependent children.

Una Farrell, spokeswoman for StepChange, says older people with dependent children struggle with unsecured debt, mainly credit cards, personal loans and some payday loans, although many still have a mortgage to pay off as well.

Parents end up spending more for the basics when they've got kids at home. A March 2013 survey from VoucherCodes.co.uk  found the average added cost of adult children living with their parents is £70.21 a month -- or £842.52 a year. The extra costs incurred are mainly for food, petrol, and energy bills.

The trend shows no signs of abating. The VoucherCodes report showed that almost 70 per cent of parents with children over 18 say their children are still living at home with them and one-third of UK adults living with their parents have no plans to move out. 

Societal changes to blame
Experts point to a number of changes in families and the economy as reasons for the trend. "A lot of it is to do with people having children later in life, starting a family in their early 40s," Farrell explains. This means children are still dependent financially when they are at university, she says, but their parents are in their 60s and nearing retirement.

Farrell says joblessness among young people doesn't help either. With unemployment in the UK particularly high for younger people, they may need support after university or college and in the first few years of their career.

It is a trend that has been noted by other research. A recent survey by Age UK and the International Longevity Centre (ILC) found that, while fewer older people are borrowing than before the financial crisis, the average amount of debt they run up has risen by as much as two-thirds over six years.

Michelle Mitchell, Age UK's charity director general, says age shouldn't necessarily make supporting a family any harder, as long as you have a secure and sufficient income. "Having family a bit later in life may mean that people have had more opportunities to work and save before they have children."

But a job loss can be catastrophic for older workers. Research also shows that if someone over 50 loses a job, it is harder for them to get back to work than for any other age group. That can force the unemployed into a spiral of debt. 

Even those who keep their jobs face challenges, among them, changing pension rules.  "Working lives are extending and the state pension age is increasing to 66 by 2020 with further rises planned," she explains.  "Therefore, people starting families in their late 30s and early 40s today are unlikely to retire until their children have grown up."

Others may face health problems that make it harder to continue working into their 60s and 70s, forcing them to retire before they are ready financially.

Avoiding the parent-debt trap
Preventing debt problems into your retirement requires advance planning. Think about how much help your kids will need into adulthood and whether you can realistically provide it, says Sarah Hennigan, certified financial planner and coach and founder of Money Clarity, a company that provides money advice and coaching for women.

An example of the types of questions you need to consider, she says, are: Do you want to fund school and university fees? Do you want to fund a deposit for a house or some type of emergency fund the child can use for some other purpose?  

"When you become clear about the financial responsibility to the children and where it ends, then it is possible to put some figures in place and build a plan around that," she says. "Have a plan and stick to it and ensure that the children are aware that the parents have their own old age to pay for and that there will be limited help available."

In fact, she says, if they are aware of the reality of the situation then they are more likely to put their own plans in place so they don't have to rely on mum and dad.

Hennigan says parents need to teach their children financial confidence and independence so they won't feel the need to come back for handouts.

"We need to go back to basics, to teaching our kids respect for money," she says. "This isn't about deprivation, this is about helping them to develop useful skills for handling money that they can take forward into their life.  Surely this is a better gift than the odd hand-out!"

How to cope with debt issues
If you're already in debt, your first step should be to make an inventory of all your income and outgoings. "If you have enough money coming in to pay your important bills and essential household expenses, but not enough to pay your creditors, then try to make arrangements to pay reduced amounts," says Age UK's Mitchell, advising that you only agree to a repayment plan if you're sure you can meet the payments.

 "Make sure that you get free debt advice if you need it," she warns.  "If you pay additional fees for debt advice, it might end up taking you a lot longer to get out of debt."

See related: How to talk about money with ageing parents; Parents do more harm than good by shouldering children's debt

Published: 28 June 2013