Growing up doesn’t always mean moving out of your parents’ house, as evidenced by the swelling ranks of adult children who have returned home after college — or who never moved out.
Called “the boomerang generation,” this group now includes about one out of every three Americans between the ages of 18 to 34, according to the most recent U.S. Census data. With college commencements just a few weeks away, it’s likely more parents will soon face a host of questions about what it means when their adult kids move back home, including how to handle finances.
“The families who have done it well are those who set expectations about what adulthood means,” such as finding work and helping with bills, said Rebekah Barsch, vice president of planning at Northwestern Mutual.
“No barista jobs. Nothing.”
Amanda Abella moved back home with her parents after she graduated from college in 2010. The job market in Miami was tough for a new grad, and housing costs were high.
“There was no administrative work, no barista jobs. Nothing,” she said.
Instead, she moved back home with her parents, a stay that stretched to seven years. Her brother also moved into their parents’ Miami home for similar reasons. The move allowed her to invest in building a career as a business coach and personal finance writer, while also saving for retirement.
“It’s one of the smartest things you can do. Just be aware there are certain things you need to do to make it work,”
Key to managing finances — and the emotions often tangled up with money — is talking honestly about expectations before adult children move home, financial experts say.
That includes setting a target for how long the adult child will live at home, with the caveat that plans often change, Barsch said.
She recommends discussing parents’ expectations about contributing to household expenses, as well as helping the adult child create financial goals such as saving for retirement or a down payment on their own home.
“It’s really asking the question, ‘Are you moving back in as an adult or as a child, who is fully supported?’ ” she said.
The rent question
Charging rent can be an emotionally fraught topic, especially for adult children who may be shocked if their parents ask them to pay to live in their childhood home. If parents want to charge rent, they should ask for below-market rates, advised Shelly-Ann Eweka, a wealth management advisor at TIAA.
“The idea is you are providing some sort of subsidy to build up some financial wherewithal,” she said.
Other parents may decide to forgo rent because it gives their adult children a chance to build their savings. That’s the case with Sidney Eley of Burlington, Vt., who said she and her husband don’t charge their 29-year-old daughter rent because she’s saving to buy her own home.
Her husband “went to the bank with her, and they laid out a plan on how much she would need for a down payment,” she said. “She is working toward completing that goal.”
But, she noted, the relationship between parents and adult children is deeply individual. “If she were the kind of child that was spending a great deal and not saving, I would have a lot of difficulty with that,” Eley said.
Don’t neglect the impact on parents’ retirement goals, TIAA’s Eweka said.
“Make sure that you are saving for retirement and paying down debt, then you will be able to see clearly how much money you can use to support your child,” she said.
More than one in 10 Americans say they receive financial support from their parents or family members, with a majority of those receiving help with bills, basic necessities and housing, research from Northwestern Mutual found.
But even paying for an adult child’s mobile phone can damage a parent’s own retirement savings, according to a 2017 study from NerdWallet. The financial site found that paying for adult children’s expenses — from rent to clothing — could siphon off up to $227,000 in retirement savings.
Adding another adult to the household will boost household expenses, creating an opportunity to talk with adult children about the costs of running a house, Eweka said.
“You may not have turned off the lights at night because you weren’t paying the bill. Now you’re like, ‘Let’s turn it off,’ ” she said.
Abella said she paid for her own phone and auto insurance while living at home. Her lesson: “Don’t expect your parents to pay for everything.”