The cost of living is rising every year, making it increasingly common for adult children to live with their parents.
One in three U.S. adults aged 18 to 34 currently resides with at least one parent. While some live with their parents by choice, this trend reflects larger economic and social changes.
Living with parents is one way adult children seek support while working toward financial stability, though the type of assistance they need can vary depending on their age or stage of life.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In almost 20 years of working in financial services, I’ve encountered a wide range of scenarios. However, there are four best practices I plan to implement with my own children one day.
Set a timeline for 'rent-free' stays
One of the hardest yet most valuable lessons I learned came when my dad “kicked me out.” We had always agreed that I would live at home rent-free for one year after graduation to save money and build a financial reserve.
After that, I was expected to move into my own place. When the one-year mark arrived, I had just accepted my job at Halbert Hargrove, but I hadn’t started yet. It was time for the hard conversation: my dad and I discussed the importance of sticking to our agreement.
I was very upset at the time and loved being at home, but looking back, I see that my dad was right. It was time for me to spread my wings, learn independence and take on the responsibilities that come with living on your own.
In the end, it was exactly what I needed. I moved in with my best friend and figured out how to live independently. Learning to live within a budget, paying bills and making sacrifices was challenging but essential for my long-term success and independence.
So, the lesson is that a “free stay” shouldn’t be indefinite. It’s easy to get comfortable, but in the long run, as tough as it may be, we need to let our children go do their own thing.
There are economic exceptions, such as more than half of Gen Z adults saying they don’t make enough money to live the life they want due to the high cost of living.
This statistic underscores the harsh realities many young people are facing, particularly as housing, healthcare and education costs continue to rise.
Set clear boundaries and requirements
If you decide to support your adult children, I highly recommend setting clear boundaries and requirements.
For example, if they are asking for financial help to return to school, consider requiring them to work on campus or get a job to supplement your support.
Additionally, you might set expectations, such as maintaining a minimum number of classes or a certain GPA.
A study by Savings.com said 61% of adults living at their parents’ homes don’t pay rent or contribute to any household expenses.
If they ask to move back into your home, set the guidelines that they will pay for certain utilities, be responsible for certain chores, or even pay rent or contribute to the mortgage.
It’s important for them to actively participate in the household and not get too comfortable.
If they have accumulated credit card debt, create a plan for them to pay down a certain percentage each month. To aid in building healthy financial habits, you could also help them develop a budget.
There are many scenarios that could arise, but I believe each person should have skin in the game. Parents should feel that their support results in tangible outcomes, while adult children should take responsibility and actively work toward their goals.
Ultimately, it’s important that both the parents and children benefit from this arrangement.
Reward saving activities
PBS research shows that teaching children about money equips them with a financial education that has been linked to lower debt levels, higher savings and higher credit scores into adulthood.
Inspired by this, I learned from a family friend the practice of matching the money my children save, which has proven to be very helpful. If they choose not to spend the money they earn and instead decide to put it into their savings account, we match whatever they save.
For context, they run a small recycling business where they collect recyclables from our household and our neighbors. Once a month, we take them to turn in the recyclables for cash, and they usually earn between $40 and $60.
If they choose to put that money in their savings, then we match that number, which helps them develop good financial habits early on.
The same concept can be applied to 401(k) contributions for your children who are just starting their careers, as early investing is crucial for long-term success.
Similarly, if they are saving for a home, you could encourage their efforts by charging them rent, but instead of spending it, you can save and invest it as a future contribution to their own home.
Provide a loan
Another tactic is providing adult children with personal loans for significant investments like furthering their education, purchasing their first home or starting a business.
However, this strategy may not be suitable for everyone. Loans tend to be more successful if the child has already demonstrated trustworthiness and strong saving techniques, and has proven to be reliable in their financial acumen.
Supporting your adult children is not a requirement, and sometimes, it’s not necessary. However, if they do come to you for help, it’s important to know your stance in advance and set clear boundaries on how much you are willing to help.
If you have a partner or significant other, whether they are your joint child or not, being on the same page and maintaining transparency is crucial. If you’re in a position to help, that’s great, but if it doesn’t align with your personal budget or longer-term savings goals, that’s completely OK, too.
Related Content
- Three Ways to Help Your Adult Children Without Spoiling Them
- The Real Cost of Funding Adult Children: Postponing Retirement
- Should You Help Your Adult Children Buy a Home?
- Three Ways to Teach Your Kids to Save Money
- How to Tackle Summer Child Care Costs
-
A Lesson From the School of Rock About the MarketsIt's hard to hold your nerve during a downturn, but next time the markets take a tumble, remember this quick rock 'n' roll tutorial and aim to stay invested.
-
I retired at 65 with $7.8 million and feel like I over-saved. My 40-something son is on the same path. Should I tell him to reconsider?We ask financial experts for advice.
-
A Lesson From the School of Rock (and a Financial Adviser) as the Markets Go Around and Around
It's hard to hold your nerve during a downturn, but next time the markets take a tumble, remember this quick rock 'n' roll tutorial and aim to stay invested.
-
I'm a Financial Pro: This Is How You Can Guide Your Heirs Through the Great Wealth TransferFocus on creating a clear estate plan, communicating your wishes early to avoid family conflict, leaving an ethical will with your values and wisdom and preparing them practically and emotionally.
-
To Reap the Full Benefits of Tax-Loss Harvesting, Consider This Investment Strategist's StepsTax-loss harvesting can offer more advantages for investors than tax relief. Over the long term, it can potentially help you maintain a robust portfolio and build wealth.
-
How Prepaid Verizon Phone Service Works and When It's a Smart ChoiceExplore the differences between Verizon Prepaid and Verizon Postpaid plans—costs, perks, flexibility, and when going prepaid makes sense.
-
Child-Free Cruises Perfect For Your Retirement CelebrationHow to find a bespoke ocean or river vacation for adults. Many of these options are smaller, charming river cruises, expeditions, or niche experiences.
-
My First $1 Million: Biopharmaceutical Senior Manager, 45, MassachusettsEver wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
