Financial Independence

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Young People and Financial Independence
a report commissioned by The Children's Mutual

Introduction

Last year The Children’s Mutual commissioned the Social Issues Research Centre to conduct research that examined the broad process of ‘emerging adulthood’ – the transition from the status of dependent child to that of independent, autonomous ‘grown up’. We noted in The Trust Fund Generation report the somewhat unrealistic expectations of young people about when they would leave home, get married and buy their first home, etc. Their estimates were almost always at a younger age than the current averages. Such delays in achieving what we might take to be hallmarks of adulthood have been steadily increasing for the last three decades and have accelerated since 2001.

We also noted in our earlier report the extent to which young people remained financially dependent on their parents for far longer than was the case only a couple of decades ago. Their apparent reluctance to flee the nest reflects extended periods of higher education (and the debts that accompany them), high property costs and other factors. It is also the case, however, as we stressed in The Trust Fund Generation, that young people increasingly expect support from their parents well beyond the school leaving age when, in the past, children were expected to become contributors to family income, rather than a continuing expense.

Looking back through history we find that at the end of the 19th century even quite young children played an important part in the family economy. Rather than receiving pocket money they were expected to add to the family income from wages earned in mines, factories and other areas of industrial production. For most young men in the Victorian era (very few women at the time were ever completely financially self-sufficient), becoming financially independent often involved learning a trade, finding a wife and, eventually, establishing his own household without much in the way of financial support from parents. In fact, working-class Victorian parents were more likely to try to keep children at home because they were a valuable source of extra income (Cunningham, 2005).

It was not until the first half of the twentieth century that this flow of money between children and parents began to change direction. As the nature of the economy changed, and popular ideas about children shifted to embrace a more romantic idea of childhood as a time of innocence and play, it became commonplace for parents to give children pocket money and other forms of financial support. Children spent less time in work and more time at school, extending the period during which they remained dependent on their parents for financial support. With the increasing importance of consumer culture as part of modern social identity, the process of raising children also started to involve spending more money and by the 1950s, parents were for the first time expected to be able to provide all the new consumer items vital to being a ‘teenager’.

For their part, young people in Britain in the middle of the twentieth century were also finding ways to make their own money and cut the parental purse strings. The abundance of jobs for young people meant that transitions into adulthood could happen relatively quickly. In the second half of the twentieth century, however, the process of becoming an adult, and the pathways towards financial independence, started to become more complex for young people in Britain. The school leaving age was raised to 16 in 1972, meaning children stayed at home and in school for longer than ever before. Access to Higher Education (universities and what were then polytechnics) was also vastly increased, while the certainty of a job after school started to diminish as the UK economy moved steadily away from manufacturing and secondary production. The transition into full-time employment was, therefore, extended even further. It became increasingly common-place, and increasingly acceptable, for parents to continue to support their children well into their twenties, if not beyond. Now, in the first decade of the 21st century, financial dependence on parents has become a fact of life for children and young adults and a normal obligation for parents raising grown up kids.

This process has had repercussions in a number of areas of social life. Young people now get married much later than was the case in the middle of the twentieth century – if, that is, they get married at all. Today’s younger adults also have fewer children, later in life. While some may leave home to attend university, a large proportion of young adults remain at home, or return to live in the parental home, until well into their twenties and thirties. Today, almost 60% of British men and 40% of women aged 20-24 still live in the parental home.

If more young people are experiencing longer and more complex transitions into adulthood this raises some very interesting questions about the idea of financial independence. Just as the meaning of financial independence has shifted since the Victorian era, is such independence in the present different from what it meant, say, twenty years ago? How do young people today define financial independence? Does it involve, as it has done in the past, severing completely the parental purse strings? Or does ‘independence’ actually involve the freedom to continue spending mum and dad’s money? Does independence involve being financially solvent, or does it mean accepting responsibility for debts and loans?

In this follow-up to the original study we have focused on young men and women aged between 18 and 25. After a set of one-to-one interviews to identify the most relevant themes within the broad area of financial independence, a national poll of 1,000 representative British people in this age group was commissioned from Opinium Research and conducted online between December 5th and 9th 2008.

Click here to access the full report in pdf format.