Difficult economic times and a tight job market have sent an unprecedented number of adult children back home to live with their parents. A 2010 Pew Research Center study showed 21.6 percent of adults ages 25 to 34 were living in a multigenerational household. Welcome to the Boomerang Generation.
There are a lot of factors at play when adult children move home, say personal financial planning experts at the Pennsylvania Institute of Certified Public Accountants (PICPA). Most parents want to help their children out, but there can be long-term financial implications and other challenges when adult children move home. Establishing ground rules will help everyone live as peacefully as possible.
To get started, here are a few things to think about and discuss in terms of living arrangements:
Length of Stay. A returning child may not know exactly how long he or she needs to stay with you, but setting a mutually agreed upon goal, such as six months, to get new living arrangements organized will help everyone move forward with an understanding of timing. Reassess and redefine your agreement as time goes by.
Rent. Will your child be paying rent or not? If assistance toward rent or mortgage, utilities, and food is necessary, decide how much and how often. If your adult child isn’t working and can’t pay rent, consider bartering the rent for extra household chores.
Household Chores. Laundry, yard work, cleaning, cooking – outline the duties for each person. Everyone should contribute.
House Rules. How will overnight guests, parties, loud music, and after-hours entrances and exits be handled? You’ve shifted from a parent/child relationship to an adult/adult relationship. Make sure expectations are addressed.
The key to co-existing peacefully is to avoid reverting to the behavior each of you had when your adult child was a teenager. All conversations regarding money and living arrangements need to address the reality of today’s financial situation.
Financial Matters Matter
Hammering out the house rules may be the easy part. You also need to talk about the financial rules of moving home. While you naturally want to help your offspring when they’re in a financial jam, you don’t want to jeopardize your own long-term financial security. A recent survey shows that nearly 70 percent of baby boomers said they have helped an adult child with college loans, and more than 50 percent said they helped with an auto loan or allowed adult children to live at home rent-free.
If you are offering financial assistance, put parameters on that assistance. For example, your adult children should be actively looking for a job or volunteering so they are continuing to add to their resume. Allowing them to sit around the house isn’t going to benefit anyone.
You also need to address how much you will lend and when it will be paid back. Some parents may choose to charge interest, some may not. Either way, if the loan isn’t repaid per the agreement, no further loans should be made.
A CPA Can Help
Yes, money can be a touchy subject, but it’s not out of line for you to talk to your adult children about their personal financial situation. They might need some tips and advice to help get them on the road to recovery. Your experience is valuable.
A CPA can also help. As a trusted, independent financial advisor, a CPA can provide the authoritative perspective that might get lost in old parent/child communication issues. A CPA can help a child evaluate his or her financial situation, plan for a way to get out of debt, and develop a strong foundation for the future.
The most important thing is that you don’t jeopardize your financial future to help in the short term. Determine how much assistance you can afford to give, if any, and then stick to that. Otherwise, the tables will be turned and you could be financially dependent on your children a few years down the road.
If you have questions about personal financial planning, contact your financial planner. To find a CPA in Pennsylvania by location or area of expertise, visit www.IneedaCPA.org.