When Adult Kids Move Home for Economic Reasons
When kids leave home for work or college most parents anticipate that it’s a permanent move. When unemployment rates climb, for example such as during the recession that began in 2008, young entrants looking to break into the workforce have to compete against many more, often more well-qualified, applicants. As they have to wait longer for a job offer and first paycheck to begin paying bills on their own, young adults often have to resort to move home to save money. According to 2009 Monster Annual Entry-Level Job Outlook, 40% of grads still live with their parents, and more – 42% - had not moved out even though they had graduated three years before. The result is that a record number – 49 million Americans, or more than 16% of the entire U.S. population, now live in a multigenerational family (defined as having at least two adult generations under one roof) according to a 2010 Pew Research Center report and analysis.
On top of a weak job outlook and difficult economy, college grads may find themselves saddled with student loans they need to begin repaying regardless of their employment situation (learn more about repaying college debt), and perhaps even credit card debt they accumulated while they were in school.
If you have, or are, a “boomerang” kid – an adult who moves back home with parents because they can’t afford to live on their own– there are some things to know to make it a successful, not stressful, period of transition for everyone involved.
Make a Plan, Avoid Misunderstandings
While many parents may welcome their adult children back into the family nest – either to help out as a short-term solution while they get back on their feet financially, or for a longer period of time – it’s wise to know the possible pitfalls up front and make a plan to avoid them. Think through your expectations and sit down for a practical, serious discussion with your adult child about the following topics:
- Reasons for moving back home. It’s important that each of you (parent and child) understand the economic circumstances behind this decision. Why is your son/daughter moving back home? It’s important to pinpoint the financial reasons so that s/he can reach the eventual goal of moving out. For example, if your son is moving home because he can’t get approved to rent an apartment because of a low credit score you can work with him on a plan to improve his credit while he saves for a new place. That way he’ll be able to save for a new place and boost his credit score so that he’ll have an easier time getting approved for loans, jobs and places to live in the future. If your daughter moves home because she recently lost a job and doesn’t have emergency savings to continue paying her rent you can help her by encouraging her to establish an emergency savings fund and begin contributing to it on a regular basis when she finds a new job. That way she’ll be financially prepared to move out and to better manage an unexpected job layoff in the future. Know the economic circumstances behind your child’s request before you agree to this decision.
- Financial expectations. Does your child expect financial assistance beyond a free place to stay? Do you? For example does s/he expect help repaying student loans or paying off credit card debt? Would you be willing and/or able to help out financially? And/or do you expect him/her to pay certain expenses? Remember that assisting someone in financial difficulty does not have to mean repaying their debts or giving them money. There are numerous ways you can help someone out financially including helping them create and stick to a budget, matching their debt payments and/or savings deposits, getting them to work with a credit counselor, and restructuring their current debt instead of merely paying it off for them. On the flip side, do you expect assistance from your adult child to help pay for items that benefit them such as groceries, utilities, etc.? Would your expectations change if your child got a job? For example, would you expect him/her to begin paying rent to you until they are financially able to move out?
- Behavioral expectations. What do you expect from your child while s/he stays in your home? For example, do you expect him/her to notify you when staying out late or overnight someplace else? Do you want your child to demonstrate proof that s/he is actively trying to find a job? Do you expect him/her to help with household chores and running errands for the family? In addition you should discuss any desire or requirement on your part that your child change behaviors that might have contributed to him/her getting into this position in the first place. For example overspending or moving between jobs too frequently, etc. Clearly establishing expectations upfront can help make the new living arrangement easier on everyone and more accurately define roles (i.e. are you going to view this as a time while you’re still “parenting” your child or are you going to live more as housemates?). In addition, having expectations in place can help better prepare your adult child to live independently.
- An exit strategy. At what point do you expect your child to move out? Immediately after finding a job? Within 3-6 months of finding employment? After saving a specific amount of money? Are there any circumstances under which you would insist they move out even if they had not yet found a job or gotten on solid financial footing? Make sure that you discuss an exit strategy and that everyone agrees to those terms to avoid a potential conflict in the future and to increase the likelihood that your boomerang child will make a permanent, successful transition to independent living.
- A transition time. You may want to consider creating a clear “transition time” wherein you would be willing to provide some form of assistance after they move out while they adjust to their new living situation. For example, perhaps you would offer to help them set up a bill-paying system, or to continue paying a portion of certain bills each month while they build up their savings, or keep them on your health insurance plan. If you choose to offer some limited financial assistance to help increase the likelihood of your child’s successful transition to independent living make sure that it’s clear for how long you will provide assistance and what your expectations are for their behavior (i.e. maintain a job for a certain period of time, pay down debt, increase savings, etc.) in order for them to continue receiving assistance.
Stay Committed to Your Own Financial Well-Being
It’s important to keep on track with your own financial planning, saving and investing while your child lives at home. While you may want to or choose to help your adult child financially, it’s prudent for that to be a deliberate decision that you make in light of your current financial needs, resources and goals instead of becoming a situation that you “fall into” by providing sporadic financial assistance to your adult child. To ensure that you continue working toward your own financial goals:
- Budget. Stick to your budget as closely as possible and using only discretionary income (i.e. income that is not already budgeted for a specific need) to provide financial assistance to your child
- Monitor your spending. Explain your current household expenses and show your child how/if those increase due to their move back home. Consider asking him/her to help defray all or a portion of the increased cost of household expenses so that you can stick to your budget. That’s particularly important if you are going to offer assistance that specifically financially benefits your child. For example if you choose to add your child to your health insurance policy will you ask him/her to help with the increase in your monthly premium? If you are going to pay for your child’s car insurance and/or add them to your own policy will you expect them to help offset some of the cost now or repay you in the future when they’re more financially stable?
- Keep contributing to your retirement investments. Your children have a much longer timeline to plan, save, and invest for retirement than you do. While you may want to help them out financially it’s important that you continue funding your own 401(k), IRA or other retirement savings and investment accounts so that you don’t have to move in with your adult child some day.
Learn more about how to help people who are having trouble making ends meet.