Kimberly Palmer: Sharing a roof, and money, with adult kids

When Amanda Claypool was 28, she left a government contracting job in Washington, D.C., and moved back to her parents’ house in upstate New York while she figured out her next step. Then the pandemic struck, and her temporary return lasted longer than she’d planned.

Living with her parents for several months “helped give me more flexibility to pivot to a new career,” says Claypool, who is now a content creator in Asheville, North Carolina. Her parents covered her expenses related to food and housing. In return, she helped them declutter and sell about $10,000 worth of vintage toys and collectibles online.

Claypool’s decision to return home is increasingly common. The Pew Research Center found that one quarter of U.S. adults ages 25 to 34 lived with parents or other relatives in 2021 and that the portion of young adults who do so has steadily climbed over the past 50 years.

Stefanie O’Connell Rodriguez, host of Real Simple’s “Money Confidential” podcast, has noted the trend. “Even prior to this latest round of inflation, we saw a greater share of millennials moving back in with parents and staying at home longer. The pandemic accelerated that,” she says.

While moving back home can provide a financial safety net for young adults, it can also negatively affect their parents’ finances and stymie their own growth toward becoming financially independent. Here’s how to navigate intergenerational living so it benefits everyone involved.

THINK ABOUT WHAT YOU REALLY WANT

Parents of young adults are often at a life stage where they’re ready for a change, such as retirement. Having kids move home “might not be the ideal situation for them,” says Lorna Saboe-Wounded Head, family resource management field specialist at South Dakota State University Extension. “Parents should think through that decision before inviting them home.”

Consulting a financial coach or adviser about your retirement readiness could help. Working up a budget to assess your current cash flow and how an additional houseguest would affect it can provide additional insight.

COMMUNICATE EXPECTATIONS

Once you’ve decided to welcome an adult child home, then it’s time to set ground rules, says Julie Lythcott-Haims, author of “Your Turn: How to Be an Adult.” Start with a candid conversation about what each party expects. “Get clear on, ‘You’re older now, things have changed. … We are happy to support you, but let’s talk about what we expect in terms of day-to-day norms and behaviors,'” she says.

In many cases, she says, it makes sense to treat young adults like Airbnb guests: They will use the kitchen and a bedroom but do their own laundry and some household chores and pay some rent. Barring mental health challenges or another crisis, a young adult should be expected to pitch in financially, too. “If they can’t pay rent, then maybe they can pay for groceries or the phone bill,” she says.

PUT THE DETAILS IN WRITING

After you agree to the financial contribution of the adult child, Rodriguez says, put those details in writing. “It helps to have something to reference or to go back and amend,” she says.

David Bredehoft, professor emeritus of psychology and family studies at Concordia University, St. Paul, suggests solidifying the ground rules into a formal contract. The document should spell out details such as who is doing laundry and paying for utilities and whether there are quiet hours or guests allowed. “Otherwise, it’s easy to slide into old roles,” he says, adding that this tendency even happens to him at age 71, when he lives with his wife’s parents in Florida for a few months each year.

TRACK EXPENSES

Rachael Bronstein, an accredited financial counselor and founder of Life’s Jam, a coaching business based in Miami, says she encourages parents to track their expenses when they’re sharing a home. Sometimes, she says, they don’t realize how much of their money is going toward the extra food, utilities and subscriptions. “They probably need to go back to their adult children and say, ‘Hey, can we figure this out? I’m paying for a lot of stuff,'” she says.

If parents don’t prioritize their own savings and retirement, then they might need to turn to their adult children for financial help in the coming years. “The greatest gift is to teach financial independence,” she adds.

At the same time, Rodriguez says, the young adult returning home should commit to moving any savings generated from the arrangement into a savings account each month or putting it toward student loans.

HAVE AN EXIT STRATEGY

Bredehoft suggests explicitly discussing how long the adult child plans to live at home. “Talk to them about, ‘What is your plan for looking for employment? How many hours a week will you invest in searching for a job? Do you need professional help?'”

Having that conversation helps the child, too. Says Claypool, the content creator in Asheville: “Give yourself an action plan so you know when to leave, or else it becomes so easy to just stay.”

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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: kpalmer@nerdwallet.com. Twitter: @KimberlyPalmer.

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NerdWallet: 5 steps to retirement planning in 2022 https://bit.ly/nerdwallet-retirement-planning-an-introduction

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