Adult Money Conversations With Kids Living At Home
According to research by the Pew Center (Here), in 2014 for the first time in more than 130 years, adults ages 18-34 were more likely to be living with their parents than they were to be living in another household with a spouse or a partner. Despite the stereotype of the nerdy slacker who lives in Mom and Dad’s basement, there are many factors that have led to this shift in living arrangements. It is important to have meaningful conversations regarding this living arrangement.
Some children do not move out because money is tight for the household and their contribution helps out their parents. Many are waiting longer to get married and their parents are willing and able to have them stay past what typically would be their college years. Others are fresh out of college and saddled with massive student loan debt. They need some help getting on their feet as they focus on starting their career.
Regardless if you are the accommodating parents or the prodigal son or daughter, make sure the situation is one that works for everyone involved. It is a personal decision for you and your family members to make. However, I would recommend that if the problem is due to bad money management and debt overload, make sure you talk about several key points.
How Long and What Terms
Have an adult conversation about how long you expect the arrangement to last and what the terms are. For as much as you all love each other, it is important to set expectations up front and be clear on the details. One party may have six months in mind, and the other party might have eternity. That’s a problem to figure out ahead of time and not when resentment creeps in.
Take Advice over a Bail Out
If you have made mistakes, accept solid financial advice over just expecting mom and dad to come to the rescue. Many people benefit from the self-esteem and confidence that comes from stumbling and getting back on your feet. Life does not always work that way and there are a lot of circumstances where the assistance is totally warranted and needed. But if you have the ability to dig yourself out of debt and use the experience as a life lesson, it can turn a negative into a real positive experience.
Work on a Budget
Sit down together and work out a budget. As a parent, if you allow a child back into your home as an adult, it is fair to ask them where their money is going. If there is a much larger underlying problem, it is so much better to get it out in the open. You have to address it head on. There are so many excellent tools available to help you get started. Tracking your expenses is essential to building solid personal finance habits.
If the arrangement comes with the expectation of paying rent every month, make sure the payments are prompt and on time. Keep regular budget meetings and review progress. Again, it is not to demean anyone or treat someone like a toddler. It is an exercise to work together to support each other and build good habits.
No Unsecured Debt
Please make sure that you all agree that the assistance involves no new unsecured debt for either party. Freeing up living expenses to live with Mom and Dad is not license to incur more debt. It should not be an excuse to spend money on frivolous items. Debt should be avoided unless it is absolutely necessary to get a car for a job, for example.
Likewise, providing assistance does not mean taking on more crippling debt like a home equity line of credit or co-signing on anything to help out your kids. Again, circumstances vary but you have to make sure to protect your interests. It is not selfish to tell a child that you have to think about your future as well.
Nobody likes the above conversations but they can avoid a lot of hurt feelings and frustration. It is not easy to talk about finances with your adult kids. The same advice holds true if a parent is asking a child for assistance. The economic realities of today have caused many people to reach out to their loved ones for help getting back on a firm financial foundation.
Like everything else with money, it is a personal decision and everyone’s circumstances are different. The biggest advice is to not use the arrangement to enable poor money management and out of control spending.