How to Make Living With Your Parents Pay Off Financially

Discussing your finances and future plans with your parents can keep everyone on the same page. (Getty Images)

In 2015, living with Mom and Dad was a way of life for 24 million young adults. According to a 2017 U.S. Census Bureau report, more than a third of 18- to 34-year-olds across the country were still under the same roof as their parents in 2015, and more millennials lived with their parents than with a spouse in 2016.

Some of the young adults are the so-called boomerang kids, those who left for college or a job only to come back to live at home again. Others have never left home, seemingly content to stay in the nest. According to the report, more than 90 percent of these adult children had been living in their parent’s house for longer than a year.

Regardless of the circumstances in which young adults find themselves at home, finance experts say it can be a golden opportunity to create strong money habits like sticking to a budget and adopting the right practices to get out of debt quickly. To do that, both parents and adults need to have open conversations and set appropriate expectations for the arrangement. Read on to learn how to jump-start your finances by living under your parents’ roof.

Understand the benefits of being a boomerang kid. When you imagine an adult child living at home, you might picture a deadbeat millennial with no job, no prospects and no motivation.

However, Doyle Williams, executive vice president of Country Financial, a family of insurance and financial services companies, says that characterization can be unfair and inaccurate. “We have these young people under a lot of pressure with student loans,” Williams says. “They are making practical decisions to live at home.”

Living with parents gives recent graduates a chance to focus on paying off debt and start building emergency funds. Even young adults who aren’t living with their parents may be financially benefiting from them. The 2018 Country Financial Security Index found 53 percent of Americans ages 21 to 37 have received financial assistance from their parents at least once since turning 21. And according to the index, of those Americans, 37 percent have received monthly support and 59 percent have received help a couple times a year. While some young adults are getting assistance for health insurance and rent, 41 percent say their parents are helping them pay their mobile phone bill.

Discuss your finances and future plans openly. Rich Ramassini, a certified financial planner and senior vice president at financial firm PNC Investments, says an adult child living at home can result in a tense situation if proper expectations haven’t been established upfront. “What we often see is where it’s done successfully, there is a conversation ahead of time,” Ramassini says.

The conversation lays out how long the arrangement might last and what contribution a child will be expected to make to the household. If money is an issue, Williams notes there are nonfinancial ways to contribute. For example, you can run errands, complete home maintenance or help with chores.

Michael Gerstman, a chartered financial consultant and CEO of Gerstman Financial Group LLC, says parents who don’t need financial help to pay the bills may want to have children put money toward savings in lieu of paying rent. For instance, rather than charge $500 for rent each month, they may insist their son or daughter put that amount into a retirement fund.

Create forward movement. If parents aren’t requiring rent payments or savings, it’s up to adult children to set their own priorities. With relatively few financial obligations, it may be tempting to spend income on impulse purchases or evenings out with friends. However, that type of behavior can create strife between adults and their millennial children.

Ramassini says there is no one-size-fits-all approach to how millennials should handle their finances while living at home, but he recommends starting with debt, then building an emergency fund and saving for retirement. It’s important that young adults demonstrate their progress toward becoming independent.

Millennials living at home should also be open about how they are making good use of the money they save by living with their parents. “For parents, it gives them a return on investment but not in [terms of] dollars and cents,” Ramassini says. For parents, knowing their child is doubling their student loan payments or getting a head start on retirement savings can be a point of pride. Plus, it makes the living arrangement feel like less of a burden.

Beyond setting aside money for major expenses, time spent under a parent’s roof can be devoted to honing a budget and following it closely. “This is really a great time to start developing good financial habits,” Gerstman says. Mastering these skills now will help smooth the transition to independent life.

Make a plan to move out. It will be easier to determine financial priorities once you have a plan and set time to leave your parents’ home. While some millennials may find their parents’ door is open to them indefinitely, others may set a specific timeline in which they need to move. If you have more time, focusing on debt or retirement savings can make sense. Young adults whose parents have indicated they have limited time at home might be better off creating an emergency fund or saving for a down payment on a home. Having an emergency fund that will cover three to six months of expenses is advisable for those who will be leasing an apartment.

“Just remember that your situation is unique to you, so your plan will not be the same as your friends,” says Joshua Simpson, investment advisor with Lake Advisory Group in The Villages, Florida. “You can’t measure your progress based on the progress of others.”

There is no financial checklist for young adults to follow when they live with their parents. However, they should keep in mind they are fortunate to be able to live somewhere that offers cheap, if not free, living. Don’t squander this time by spending all your money on disposable items you might not even remember in five years’ time. Instead, focus your cash on repaying debt and saving for retirement – tasks that could be harder to prioritize after you’ve left the nest and have more of your own bills to pay.

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