Multi-generational and single-parent households: financial planning for future families

The most recent government data shows married or civil partner couples were the most common family type in the UK but for the first time since records began, in 2021 more babies were born to unmarried parents in England and Wales than those born to parents that are married or in a civil partnership.^[i] Multi-generational households are on the rise too, with rising housing and care costs a likely contributor to this upward trend. But how are these changing family dynamics affecting how we plan for the future?

The evolving image of family: what does it look like today?

Societal trends, such as the diverging views on the importance of marriage, increased divorce rates and re-marriages, means family structures are migrating away from the traditional nuclear family model that has been the norm for centuries. An estimated one in three families in the UK are ‘blended’, meaning they have a combination of parents, new partners and children from different relationships.^[i]

The rise of single parenting

In 2021, there were 3 million lone parent families, which accounts for 15.4% of families in the UK.^[i] The vast majority of these lone-parent families were lone mothers (86%). While the predominance of lone mothers is starting to decrease, with the number of lone parent fathers rising by 22% in 20 years, the challenge of sole-parenting is still falling disproportionately on women.^[ii] This can have a significant impact on women’s financial futures, having to contend with the considerable pressure on their finances in the present day as they raise children while also attempting to save for their future and build up a pension pot.

Living alone

The number of people living alone in the UK has increased by a fifth over the last 20 years, from 6.8 million in 1999 to 8.2 million in 2019, accounting for 13.5% of all adults in the UK.^[i] The decision to live alone, does come with greater financial vulnerabilities, with these individuals reliant on just one income to contend with day-to-day living, while also saving for a future in which they may also be reliant on just one pension income.

Having appropriate protection in place could provide a security blanket in the event of a loss of that income. We are often quick to protect against death but less aware of protecting against a loss of income due to ill-health”.

Keeping it in the family: the multi-generated household

Although they currently represent the smallest share, households that consist of two or more families were the fastest-growing type over the last two decades to 2019. They grew by three-quarters from 170,000 in 1999 to 297,000 households in 2019 – an increase that the ONS describes as ‘statistically significant’.^[i]

The reasoning for multi-generational families choosing to live together varies, ranging from culture, caring for relatives and children, through to financial, such as children staying at home to save for a house deposit.

Young generation aren't fleeing the nest: can't go or won't go?

Our research finds Generation Z (aged 18 to 25) do not anticipate moving out of the childhood home until the age of 25, compared with Baby Boomers (aged 58-76) who moved out of their family home at 21.^[i] As house prices rise further, and rental prices becoming increasingly unattainable for young people, we could see the age at which young people flee the nest rise even further, placing increased pressure on the finances of parents at a time when they may be looking to pay off their mortgage, boost their pension pot, or potentially downsize to unlock property wealth. Indeed, Generation X (aged 42 to 57) who fall between Millennials and Baby Boomers, have already had to postpone their downsizing plans by an average of 5.5 years.^[ii]

The 'sandwich' generation: caring for kids and parents

Multi-generational families, are predominantly supported by the group commonly now known as the ‘sandwich generation’, those caring for both their children and elderly parents.^[i]

A report by the ONS found that more than a quarter of the 1.3 million (3% of the population) people in the 'sandwich generation' – are now suffering financially and emotionally because of the strain.^[ii] This burden is falling disproportionately on women, with 68% of these ‘sandwich’ carers being female.^[iii] As life expectancy increases and people enter parenthood later in life – the average age of mothers now stands at 30.7 years^[iv] – those facing the dual burden of caring for older relatives and children is only set to grow.

With 1.2 million older people needing community or residential care by 2040, almost double the rate we saw in 2015,^[v] the financial burden means that the proportion of ‘sandwich generation’ households is likely to increase.

Those in the ‘sandwich generation’, face the greatest impact on their personal finances as older age becomes more commonplace. Elderly parents may need extra care, whilst young children will require time, attention, and funds to raise. Individuals within a sandwich generation will be planning and supporting their own milestones and the milestones of the generations either side of them – be it university, retirement support or long-term care or just supporting life’s key milestones, they all need to be planned and accounted for. 

Marriage and divorce- till mid-life do us apart?

Marriage is undoubtedly on the decline. The ONS estimates that the marriage rate will decline at a compound annual rate of 3.6% over the five years through 2022-23, to 7.7 persons marrying per 1,000 people.[i]

The waning popularity of marriages is no doubt driven by a growing recognition that many marriages end much sooner than ‘death do us part’, bringing both emotional and financial turmoil as a result.  It is estimated 42% of marriages now end in divorce.^[ii]

Financial implication of divorce

Divorce is not only a hugely emotional period, it also presents significant financial disruption. In 2018, divorcing couples on average spent upwards of £14,561 on legal and lifestyle costs such as housing and furnishings.^[i]

The notion of marriage as the ‘gold standard’ for relationships is fast declining. The rise in civil services has seen the religious significance of marriage wane, while gone are the days of societal expectations that you must marry before living together or starting a family. While marriage may fast be becoming an outdated institution, it does serve an important financial purpose. For married couples, there can be significant tax and pension benefits.

By 2040, we could see a scenario where marriage is the exception to the norm. If cohabiting couples are to become the norm, then by 2040 we could be in need of a significant overhaul of the legal treatment of these couples to ensure they are entitled to the same benefits and protections, such as inheritance tax exemptions, shared tax allowances and transfer of pension assets.

When looking at the marriage statistics today, divorce is sadly an eventuality for one in two couples. Bearing this in mind, it’s realistic for married individuals to consider how they would retain financial stability if the worst was to happen. The impact of losing tax benefits, not receiving a fair split on pension portfolios, or not having access to a legal safety net to protect finances following a split can have long-lasting repercussions for our personal wealth, assets and long-term financial stability.  With a higher risk of marriages failing, couples entering marriage should now also be thinking about pre-nuptial and post-nuptial agreements. While something that has historically been less common in the UK, they are growing in popularity – particularly as advances in women’s careers mean many now wed on a more equal financial footing.

Families of the future: planning ahead

The increase of blended and multigenerational family structures will have complicated implications on inheritance planning – as a clear line of succession may be blurry. Wills should be regularly amended to reflect the changing family network, especially where there are second marriages. Along with wills, Powers of Attorney and guardianship wishes should all be formalised. With children having to aid parents later in life, having Powers of Attorneys in place could simplify matters

With an increasing number of parents raising children at an older stage of their life, and with the findings of this report showing that it is set to continue, parents will be providing for their children when they should also be buckling down to save for their future retirement. Starting personal financial planning as early as possible could help families to bolster their pension income and pay off their mortgage when raising a family, to ensure greater financial stability later in life.

Need help with complex family finances?

Evelyn Partners can help every family dynamic. Our financial planners can work with you to map out your current and future financial needs, help you make decisions about how best to use the assets you have and decide what’s most important to you.