Boomerang kids, boomerang budgets
When Christina Newberry first moved back in with her parents, she was a 21-year-old recent college grad. Eight years later, she found herself back on her parents' doorstep after the breakup of a long-term relationship.
Newberry is one of the thousands of young, and not-so-young, adults who make up the boomerang generation - adult children forced to cohabitate with their parents because of a lack of financial independence.
Statistics show fewer young adults are able to live on their own. Among 18-to-34-year-olds, 10 percent say the recession has forced them to live with their parents, a 2009 Pew Research Center study found.
"The economy has a lot to do with it," says Newberry, author of The Hands-On Guide to Surviving Adult Children Living at Home. "Financial struggles are one of the main reasons why children move back in with their parents and it's just realistically harder these days to find a job, especially right out of college, and a job where you can support yourself and get your own household established," she says.
An estimated 37 percent of 18-29-year-olds are either unemployed or out of the workforce - the highest percentage of this age group in nearly three decades, a 2010 Pew Research Center analysis of Bureau of Labor Statistics data found.
Sky-high student debt and minimal job opportunities create a perfect storm for young adults, and will force an estimated 85 percent to return home this year after graduation, according to projections from Twentysomething Inc., a young adult consulting firm.
"We're seeing people in their 20s and even 30s moving back home sometimes for extended stays," says David Morrison, managing director and founding partner of Twentysomething Inc. "That's a new development with the current economy, we've not seen that in past recessions and that's a trend that is certainly on the increase right now."
With statistics like that, what parent wouldn't want to help? But before you welcome your son or daughter with open arms, there are a few things you can do to ensure a positive experience all around.
Budget together: Turning your empty nest into your adult child's crash pad means readjusting your budget in a number of areas. Added grocery, electricity, heating and insurance costs need to be factored in to a new monthly plan.
"There's a misconception from the adult children's side, and sometimes from the parent's side as well, that it's free to have the adult child come and live at home as long as the room is there and available. That's just not true," Newberry says.
Include the adult child in the budget-making process to illustrate just how much of a financial impact their presence will have. The budget talk is also a good opportunity to project future expenses when the child eventually moves out on their own.
"They may have no idea how much it costs to run a house, how much the electrical bill is, how much rent is, how much food can cost you. Sit down with them and show them what their budget is going to be when they move out on their own so they can work toward that," says Erin Baehr, a financial advisor with Baehr Family Financial.
Negotiate: Is it appropriate to ask your child to cover some expenses? Whether it's rent or a cellphone bill, the added pressure will likely motivate the child to look for gainful employment sooner and will get them in the habit of saving for monthly expenditures, says Baehr, whose own son Brian recently moved back home after graduating college.
Baehr negotiated a grace period with her son where she and her husband foot the bill for expenses directly related to him, like his car insurance, for the first few months of cohabitation.
"In past years families would live together and pool their resources. I know my Dad had to turn over his pay checks to his parents when he was in high school to pay the bills. If you need that money than don't feel guilty about asking them to pitch in," she says. "On the other hand, if you don't need it then it's still a good idea to charge them a reasonable amount of rent to teach them, and get them practicing paying their bills. You can hide it away some place and give it back to them when they're ready to move out so they have a little nest egg."
Even if your child is willing to pay for bills, job prospects for the class of 2010 are increasingly bleak. Unemployment levels are the highest they've been in a generation and unemployment rates for college grads younger than 25 are nearly double their pre-recession levels, according to the Economic Policy Institute.
If your child is having a rough go on the job front and can't contribute monetarily, there are other ways to ensure they earn their keep.
"In some cases the child has no money whatsoever, and in those cases, the parent and the child should work out some kind of agreement where the adult child is contributing their manual labor instead of dollars. There should still be a set rent that they work off every month," Newberry suggests.
Teach financial stewardship: The economy will eventually turn around, so use this time to help the child become established as an independent person.
"Kids don't even understand the concept of a paper checkbook anymore," Baehr says. "They just look online. They have no recordkeeping system, and it's really easy to lose track of what you're spending. Where did my money go? Why am I overdrawn? How did that happen?"
Listen to your child's problems and concerns and relay your own personal experiences. Refrain from judgment and recognize your children are establishing themselves in a much different world than when you were trying to make it on your own.
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