Record numbers of young adults are moving back home to live with their parents, thanks to high housing costs, inflation and remote work options. The arrangement can give young adults a much-needed financial boost, but it can strain their parents’ finances. For this reason, experts recommend that young people contribute financially to the household, and that both parties clearly express their expectations. Parents should monitor their spending to keep track of additional expenses and help their children develop an exit strategy and eventual path to financial independence.
When Amanda Claypool was 28, she quit her government contracting job in Washington, D.C. and moved into her parents’ home in upstate New York while she figured out her next move. Then the pandemic hit, and his temporary comeback took longer than he had planned.
Living with my parents for a few months “helped give me more flexibility to transition into a new career,” says Claypool, who is now a content creator in Asheville, North Carolina. His parents took care of the food and housing expenses. In return, he helped them get involved and sell about $10,000 worth of vintage toys and collectibles online.
Claypool’s decision to return home is becoming more frequent. The Pew Research Center found that a quarter of US adults aged 25 to 34 lived with parents or other relatives in 2021, and that the share of young adults who do so has risen steadily over the past 50 years.
Stephanie O’Connell Rodriguez, host of Real Simple’s Money Confidential podcast, noted the trend. “Even before this latest round of inflation, we saw a greater share of millennials moving back in with their parents and staying at home longer. The pandemic accelerated that,” he says.
While moving back home can provide a financial safety net for young adults, it can also negatively impact their parents’ finances and hinder their own growth to become financially independent. Here’s how to navigate intergenerational life in a way that benefits everyone involved.
THINK ABOUT WHAT YOU REALLY WANT
Parents of young adults are often at a stage in life when they are ready for a change, such as retirement. Children moving home “may not be an ideal situation for them,” says Lorna Saboe-Wounded Head, family resource management specialist at South Dakota State University Extension. “Parents should think about that decision before inviting them home.”
Consulting with a financial coach or advisor about your retirement readiness can help. Creating a budget to assess your current cash flow and how an additional house guest might affect it can provide additional insight.
Once you’ve decided to welcome an adult child home, it’s time to set some ground rules, says Julie Lythcott-Haims, “Your turn. Author of How to Be an Adult. Start with an honest conversation about what each party expects. “Understand clearly. “You’re older now, things have changed… We’re happy to support you, but let’s talk about what we expect in terms of daily norms and behavior,” he says.
In most cases, he says, it makes sense to treat young adults like Airbnb guests; they will use the kitchen and bedroom but do their own laundry and some housework and pay some rent. Without mental health challenges or another crisis, a young adult should be expected to handle finances as well. “If they can’t pay the rent, maybe they can pay the groceries or the phone bill,” she says.
WRITE THE DETAILS
Once you’ve agreed to the adult child’s financial contribution, put those details in writing, Rodriguez says. “It helps to have something to reference or go back and correct,” he says.
David Bredehoft, professor emeritus of psychology and family studies at St. Paul’s Concordia University, suggests enshrining the ground rules in a formal contract. The deed should include details such as who does the laundry and pays for the utilities, and whether there are quiet hours or if guests are allowed. “Otherwise, it’s easy to slip into old roles,” he says, adding that the tendency happens to him even at age 71, when he lives with his wife’s parents in Florida for several months each year.
Rachel Bronstein, a certified financial advisor and founder of Life’s Jam, a coaching business based in Miami, says she encourages parents to watch their expenses when they share a home. Sometimes, he says, they don’t realize how much of their money goes toward extra food, utilities and subscriptions. “They should probably go back to their grown children and say, “Hey, can we figure it out? I pay for a lot of things,” he says.
If parents don’t prioritize their savings and retirement, they may need to turn to their grown children for financial help in the coming years. “The greatest gift is teaching financial independence,” he adds.
At the same time, Rodriguez says, a young adult returning home should commit to moving any savings from the arrangement each month into a savings account or putting it toward student loans.
DO YOU HAVE AN EXIT STRATEGY?
Bredehoft suggests clearly discussing how long the adult child plans to live in the home. “Talk to them. “What is your plan for looking for a job? How many hours a week will you invest in looking for a job? Do you need professional help?”
That conversation also helps the child. Says Claypool, a content creator in Asheville. “Give yourself a plan of action so you know when to leave, otherwise it will be so easy to just stay.”
This column was provided to The Associated Press by the personal finance website NerdWallet. The content is for educational and informational purposes and does not constitute investment advice. Kimberly Palmer is a personal finance expert at NerdWallet and author of Smart Mom, Rich Mom. Email: [email protected] Twitter: @KimberlyPalmer.