Jill MacKay

The concerns highlighted in Scottish Friendly’s research are borne out by the Institute for Fiscal Studies’ (IFS) data, published on 11 January, which shows the number of UK adults in their 20s and 30s living with their parents has risen by over a third over the last two decades. The IFS report cites a number of contributing factors – accommodation costs amongst them. It exposes the extent to which Generations Y and Z have been priced out of a fundamental rite of passage into adulthood, leaving home. 

Jill MacKay, savings specialist at Scottish Friendly, said: “The fact that six out of 10 parents worry their child won’t be able to afford to leave home is concerning. If we are to ensure that Generation Alpha, and those that follow Alpha, have a greater chance of being able to enjoy the rite of passage of leaving home - one last fully experienced by Gen X – then, collectively, we need to find ways in which to increase Gen Alpha’s financial resilience to ensure that independent living isn’t being denied to them for want of a rent deposit.”

The modern mutual suggests one way in which to help build greater financial resilience amongst younger generations is by changing a small line in the current Junior ISA (JISA) regulations to enable extended family to set up a JISA on behalf of a child. That way when the child reaches 18 years old it has a nest egg. Currently, the rules only allow parents or legal guardians to set one up.

The appetite is there from parents for extended family to be allowed to step in to help out and it’s matched by the appetite from extended family to do so.

Almost a third (32%) of parents said they would want the child’s grandparent to be able set up a JISA. 15% would like another relative to be able to set up a JISA. And 1 in 10 (9%) say they would like friends to be allowed to set one up

Meanwhile, 36% of extended family would set up a Junior ISA on behalf of their grandchild, nephew, or niece if Junior ISA rules were relaxed (Scottish Friendly Family Finance Tracker 2024)

On average parents only get around to setting up a Jisa by the time their child is three to four years old. The cost of delaying, even by just a few years, is significant.

Those ‘lost’ growth years means the child misses out on an additional £5,733 by the time they’ve reached 18 if saving didn’t start until year three. For every subsequent year’s delay the compounded loss increases. If parents wait until the child is 10 years old before taking out a JISA that equates to having £15,412 less by the time the child reaches 18

Ms Mackay added: “You can’t put a price on the benefit of building greater financial resilience, but you can put a pounds and pence number on the impact of delaying doing it.

“We know from research we conducted that over a quarter of extended family would set up a JISA on behalf of their grandchild, niece, or nephew if the rules allowed it. We also know that there is a clear appetite amongst parents to let extended family help them with life admin when they have their hands at their fullest – from birth to three and four years old.

“The compounded growth those early years investing can provide offers access to life opportunities, such as being able to afford to leave home, that the child might otherwise miss out on

“That is why we would love to see one small change made to the line in the JISA rules, to allow extended family to set up JISAs on behalf of their loved ones. It’s a small change that would make a big difference to young people and their families - helping to gain greater independence and a life outside the parental home.”