Financial shocks faced by families with no ‘bank of mum and dad’

16 December 2021

Parents on low to middle incomes are struggling to support young adults who cannot afford to move out of the family home, new research has found. While better-off parents can provide support and be the ‘bank of mum and dad’, those with limited means are less able to help. They can struggle to make ends meet, especially as a result of sharp reductions in support from the state when their children are around 18.

Two in three single people aged 20-34 (without children) now live with their parents, totalling over 3.5 million young adults. Today’s study by researchers at Loughborough University funded by abrdn Financial Fairness Trust looks at the challenges facing low to middle income families where young adults live with their parents. It finds that:

  • The high cost of alternative housing, difficulty finding stable work, and insecure, low income means many young adults feel they have no option but to live with their parents. The pandemic has highlighted and exacerbated issues that they already face, making the prospect of moving out even more difficult.


  • Families on low incomes can lose between £300-£680 a month in Universal Credit (UC) and Child Benefit when a child leaves secondary level education or training and stops being considered as ‘dependent’ (usually around the age of 18). They find this sudden cliff-edge loss tough to deal with and can be caught out by the income shock they will face.


  • The greatest losses are for a working parent who is an owner-occupier (around 1 in 4 of those claiming UC) when their only or last child becomes non-dependent. This is only partially offset by the amount a young person aged 18 can claim on UC which is £257 a month. The benefits system assumes young people will start contributing to household finances, but often they have limited means to do so, especially if they are not working.


  • Parents receiving social security benefits who live in rented housing are penalised for having grown-up children living with them, through a reduction in support for their rent – for those on Universal Credit this is a reduction of £75 a month where their child is 21 or over. The young adult is expected to make up the shortfall, but if they are out of work, they get no rent support to pay for this deduction. This means that either young adults have to use money from their basic benefits or their parents have to cover the reduction – both of which risk hardship for low income families.


  • When benefits for the parents are reduced, the young person needs to contribute more financially to fill the gap. Young adults’ contributions can make a significant difference to household finances but can also make it harder for them to save towards leaving home.

Researchers found that living with parents could bring both benefits and challenges. It can provide a safety net and emotional support for young adults trying to cope with an uncertain world. Parents could value having their children around, but lack of space and difficult relationships could cause tension where they have limited options.

Living with parents could help financially, at best, this could offer young adults the chance to save for a deposit for renting or buying a flat; however, support is not one way. Young adults’ contributions could help keep their parents afloat, especially where they were working and contributing from their wages, but some needed to support the family finances rather than save. It could be difficult to negotiate these financial relationships, and hard to work out what was a fair system for sharing responsibilities.

The report makes two kinds of recommendations: to provide selective improvements to financial support for these families, and to provide better information and guidance to help families plan joint living arrangements that can last for years, rather than just representing a short transition until young adults move out.

The two key recommendations for improved entitlements are:

  • Extending entitlement to the Universal Credit Work Allowance to any family with at least one child under the age of 23 living in their home. This would ease the most severe ‘cliff edge’ caused by loss of this allowance when a working family no longer has dependent children and help support the family for a transitional period. This would benefit up to 22,000 families who face particularly high reductions in income with an estimated cost of not more than around £50 million per annum.


  • Not reducing rent support through Housing Benefit or Universal Credit to parents with young adults living with them in cases where the young adult does not earn, and therefore cannot be expected to contribute to rent.

To improve information and advice for these families, the report recommends that:

  • The Department for Work and Pensions and Jobcentre Plus should consider means of encouraging claims by young adults living with parents, through a range of mediums including innovative and targeted campaigns, web materials and social media initiatives making clear their entitlements.

  • A dedicated support/advice service should provide a website and/or other resources bringing together information and advice for both young adults and their parents who live together. This could be provided by an existing advice agency and should include input from young adults and parents, and the opportunity for people to share information.

Katherine Hill, lead researcher (Loughborough University), said:

“Without the ‘Bank of mum and dad’ those on lower incomes do not necessarily have the means to financially support their children when living at home, or assist them moving out. Young adults want to contribute, but for families in the most difficult circumstances, the expectation that young adults cover a shortfall in parents rent takes a sizeable chunk of their income if they are not working. This deduction should be aligned with the support young adults, and their parents, receive.”

Mubin Haq, Chief Executive at abrdn Financial Fairness Trust, said:

“The current system is failing our next generation, widening the gap between those whose parents can afford to help them move out and those who cannot. Government policy needs to be urgently changed to provide better support for families on lower incomes where adult children live at home, many of whom are struggling to make ends meet and often face significant losses in benefits. This is a group that has not been in the public spotlight, yet young adults living at home is the new normal. Much greater efforts are needed to provide the support and advice they need as currently there is very little on offer.”

The full report is available to download.