When the kids come back home (Don’t let them wreck your retirement)

The stories have been all over the news for some time now. Burdened by crippling student loan debt, Millennials are returning home to live with their parents. According to a Pew Research Center report, for the first time in modern history, more 18-to-34-year-olds are living with their parents than those living single, with a partner or with roommates. Nearly one-third of young adults lived in their parents’ home, according to the report.

And while most parents will do just about anything to help their kids, they need to make sure it does not interfere with their retirement.

“People say I am helping my daughter,” says David Evans at Evans Financial Group in Shreveport, La. “I say, do you understand you  can’t help your daughter or you will run out of money?  Your stash will run out of money. It may not be enough to carry you through your Golden years and your kids through midlife.”

Jeremy Keating, investment advisor with Capital Income Advisors in San Diego, says the key is to not let your children get too comfortable.

People come in with this a lot,” he says. “Don’t make it too comfortable. If you start doing laundry again and all, why would they want to leave?”

Keating says the keys to making the arrangement work without ruining your finances is setting the rules and boundaries up front.

  • Have a budget. “Do you know what your budget is? Say, hey kids here is our budget. It doesn’t change. A lot of kids moving back home already have jobs, but they have student loans or credit card. Look at your average budget and the budget with kids home. They should pay the difference.”

“You should charge them rent, even if the parents don’t’ need a penny,” he says. “Keep it in an account, and when they leave give it back to them as a down payment that they won’t blow.”

“Set an arrangement of what they pay,” says Charles Winfrey, of the Rollover Company in Nashville, Tenn. “Call it rent, or the shared cost of utility. We know there will be increases in your expenses, whether it’s additional electricity, food. It needs to be financially sound and feasible for the parent. Many times parents are already in retirement or approaching retirement. They have adjusted their lifestyle to those expenses. They have enough left over that they can enjoy. When expenses go up because you have an additional person, expenses go up. So say, while we are here together, let’s share costs.”

  • Establish a time frame. “I tell people they need to establish the time frame,” Keating says. “So often family when borrows money, you hear story, I’ll pay you back. It’s a never-ending payment schedule. My mom loaned me $5,000. She made me sign a written contract. She said when you make $100,000 (salary) you send me $10,000. She initialed and sent it back to me.”

“If the kids come home, they think they have free reign,” Keating says. “They don’t realize they are intruding on parents lives. Let them know the budget and that they have to pitch in. Don’t make it easy, give them chores. I believe you also make them a better human being when they learn they know how to clean a little and save a little.”

“You still have to have empathy to understand the situation that many graduates and children have,” Winfrey says. “The economy is not what it was. Be compassionate. Say I am grateful I have this house you  can come back to. If that part is not there, the other part  feels more like a landlord. This is still your child. Be understanding, but have rules. Financially, you need to be responsible, this is only for this amount of time.”

This article is for informational purposes only and is not intended to provide any specific tax, legal, or financial advice.