Saving money: How to live with extended family without drama

Should families stay together in the same home?

For some cultures, it is a normal way of life. Not only does living together make good financial sense, by pooling the big living costs such as housing, childcare and day-to-day bills, it can be enriching and life affirming for young and old family members to cohabit.

Multigenerational living is increasingly popular. Around 20% of Australians live with two or more generations of related adults in the one home. In Sydney, with its high property prices, 25% live in extended families, according to the UNSW's City Futures Research Centre.

For people from the Middle East, Asia and southern Europe, sharing with grandparents and young adults is common and it is increasingly popular in other cultures, too.

Share the load

Older non-working grandparents and parents can help with childcare, school drop-offs and pick-ups and disabled and sick children.

They can contribute to cooking, gardening, home maintenance - whatever is agreed upon - while younger parents focus on their careers. In return, younger adults can support their elderly relatives as they age and their health declines. They provide companionship and emotional comfort.

There are cost savings of living under the same roof with shared bills and home maintenance. Grandparents save on airfares or other transport costs that they would have incurred visiting their children and grandchildren.

The saying 'it takes a village to raise a child' could describe an extended family, with children benefiting from the wisdom and unconditional love of older relatives as well as their own parents.

The high cost of housing is prompting adult kids, their partners and sometimes their grandkids to live in the parental home. It could be temporary while they save towards their own home.

Then there's a group of middle-aged people who can't bear to place their parents in aged care, so they take them in.

Consider a granny flat

I bought a house with a granny flat so my mum could live with my family. She was growing frail, wasn't eating much and was lonely. But she kept saying she didn't want to get in our way and be a burden, and she valued her independence.

Some property developers specialise in building homes for extended families, with a separate unit for independent living. There are two front doors, a communal kitchen and laundry under the same roof. The granny flat allows family members to live close by but with a bit of space between them.

I have a friend who is considering upending her life by selling her home, moving to a cheaper area some 15 kilometres out of the city and buying a bigger house so she and her husband can live with her daughter, her partner and their baby because she says they can't afford to buy a home of their own.

I advised her not to rush in but let the idea sit for a long time to consider all the angles. Often women end up being default carers, looking after their children as well as their elderly relatives.

Define the roles and costs

No one wants to be taken advantage of, and to avoid resentments you need a system with defined roles and an agreement about household tasks, such cooking, cleaning, washing the clothes and taking out the rubbish.

Importantly, it needs to be clear who pays for food and other costs, such as rates, water, power and insurance.

Respect on both sides is essential for harmonious living. So is flexibility and compromise. Some experts recommend a regular monthly meeting to deal with any household issues and overspending.

It is important to plan for various scenarios such as divorce, ill health, jealous siblings, tension with your adult child's partner and death. Taking legal advice is a good idea before you embark on inviting your adult kids or parents to live with you.

Be prepared for plans to change

As the years go by, plans will change. Just how long an elderly parent can live with their adult kids depends on their health. It could be for decades, long after adult kids have left home.

There is home-care support for frail parents, to free up their kids' time and effort. It can be hard - often impossible - to look after an ageing parent who has dementia.

There are different symptoms: for example, if they become aggressive and keep wandering off, it is time to consider aged care.

The problem with transferring your wealth into housing for your children is that it may restrict your options if you need to transition into aged care. No one knows how ill or disabled they will be in their old age. Around 20% of Australians older than 80 end up in aged care.

If you tie up your wealth in a multigenerational home, how do you afford residential aged care or a nursing home bond without selling the family property?

There are other financial options, such as using any cash savings to pay for aged care accommodation. Another option, a reverse mortgage, has a lot of financial implications for the family, particularly with high interest rates and snowballing debt.

For parents considering pooling their home, remember that owning your own place gives you independence.

You can sell it later in life if you need to move into a retirement village or a nursing home.

If you tie up your property with your adult kids, you won't be able to extract the money for aged care needs because it would affect their housing.

Perhaps they could pay for you, but would they be prepared to do that? You would be dependent on them for care.

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