The economy is improving in many ways (unemployment is down, real GDP is up), but one less-than-ideal trend is on the rise: More adult children live with their parents now than they did just two years ago, according to a recent poll from Fidelity [PDF].
Fidelity’s poll found that 21 percent of Millennials (aged 25 to 35) currently live at home with their parents, compared to just 14 percent in 2014.
“There are several factors contributing to the 'fuller house,'” Kristen Robinson, senior vice president of Fidelity Investments, tells mental_floss. “For one, Millennials are the most educated generation, and with the increasing cost of higher education, many graduate with significant student loan debt. Living at home can provide an opportunity for this generation to make a dent in their debt before being on their own.
Millennials may also be more career-focused than previous generations. They’re postponing marriage more than previous generations, and Robinson adds that moving back home may be a strategy to focus on careers and financial security while they make a dent in their debt. Data backs this up: Despite living with their parents, 85 percent of Millennials have some form of savings, according to Fidelity’s study.
Of course, moving back home isn’t exactly a cakewalk for parents or their adult children. If you've made the tough decision to move back into your childhood bedroom, here’s how to make the transition a little easier.
1. DISCUSS YOUR EXPECTATIONS.
To avoid any potential conflict over money, time, or habits, it helps to discuss expectations in each of these areas before you move any boxes.
For starters, your parents may have certain ideas about how you handle your finances while you live with them. If your parents expect you to prioritize your student debt, for example, they might be disappointed to see you spending on nights out with friends. Or, you may have conflicting expectations about each other’s schedules and daily habits. Your parents may want you home at a certain time, or to join them for dinner, or to pitch in with specific chores or maintenance.
To avoid a blow-up each time you skip a family meal or stay out all night, you need to have an open conversation with your parents before moving back in.
2. CREATE SOME RULES AND GUIDELINES.
Once expectations are laid out, it’s important to come up with some rules and guidelines in order to ensure everyone's needs are met. “When an adult child boomerangs back into a parent’s home, it’s important for the family to discuss who will pay for which expenses,” Robinson says. “Young adults should not assume their parents will pay for the same expenses they did growing up; and likewise, parents should use this as an opportunity to establish new financial guidelines. Communicating these expectations from the beginning should reduce misunderstandings later.”
Beyond money, you may want to set clear boundaries on your time and schedule. If you'll be out all night, do you owe your parents a call so they don't worry? Do you set a laundry schedule so you can avoid congestion in the laundry room?
3. COME UP WITH AN EXIT PLAN.
You probably don’t want to live with your parents forever—but when you're paying minimal rent and have someone to split the grocery bill with it can be hard to leave. Create a realistic framework for building up your savings and a timeline for setting back out on your own.
To do this, you'll need to learn how to spend responsibly. “If a young adult wants to move out of their parents’ home, a good first step is to set financial goals and create a budget,” says Robinson. “On their own, Millennials will likely incur new expenses that, while living under one roof, their parents may be covering.”
“Fidelity’s rule of thumb suggests a simple 50/15/5 approach to budgeting, where 50 percent is for essential expenses, 15 percent is for retirement savings, and 5 percent is for short-term savings," Robinson says.
4. BUILD AN EMERGENCY FUND
An emergency fund is the foundation of financial security, and you should include one in your exit strategy. “It’s a good idea to have an emergency savings fund,” Robinson says. "With that financial foundation, [Millennials living with their parents] can start to understand how much money they will need to live on their own, and if they haven’t reached their financial goal yet, they can create a plan to get there.”
Most experts recommend having between three and six months’ worth of basic living expenses in your emergency fund. Again, it’s important to get a clear idea of what those expenses are so you can save accordingly.
5. KEEP THE CONVERSATION GOING.
Money can be a taboo topic, but it’s important to keep the dialogue going, Robinson says. “Having an adult child living at home presents a perfect opportunity to have regular money conversations where parents can share financial successes—and mistakes—from their life, giving their kids an opportunity to learn from their experiences,” she says.
It’s also a good opportunity for parents and adult children to talk about the future. “Even for young adults who are financially independent and living on their own, it’s important that parents and adult children have ongoing conversations related to retirement, elder care, health care costs, wills and estate planning, and inheritance,” Robinson says. “Specifically, parents can communicate what they want for their future, and also explain what role they expect their adult children to play so there are no surprises.”
These conversations aren’t easy, but it’s important to be prepared.