How to Manage Money When Your Kids Move Back Home

By Nat Sillin

Multigenerational households are nothing new. Before 1950, it was common for parents, children and grandparents to live together under one roof. Amongst the benefits, these living arrangements helped people save money on rent, utilities, childcare and other major expenses.

Due to recent economic realities, multi-generational living has made a comeback.

According to new data from Thrivent, 46% of parents say their children aged 18 to 35 have moved back home. This generation of young adults, also known as “boomerang kids,” are driven by economic factors like costly housing, student loan debt and instability in the job market. 

Financial Implications for Multigenerational Households

Welcoming your adult children or your parents into your home can strengthen family bonds… but it can also strain them.

Opening up your home often means having less space, less quiet, and making changes to your budget. In the Thrivent survey, 38% of parents who took in their adult children said it impacted their retirement savings and other long-term financial goals.

For members of the sandwich generation — that’s people who are simultaneously taking care of both their parents and their children — New York Life found that 26% were contributing less or nothing to their emergency savings as a result of the arrangement, and just as many were taking on more debt.

Given the potential consequences, it’s crucial to lay some financial ground rules before making space for your loved one’s return. 

Five strategies for managing a multigenerational household

To help keep your relationships and your finances intact, follow these guidelines for setting up your multigenerational living arrangement and managing household expenses together.

1. Assess your financial capacity 

Bringing family-members into your home can mean major changes to your finances. Unless they’re helping with bills, you can find yourself shelling out a lot more for utilities, food and other costs.

Do you have the financial capacity to take on those expenses? Will the changes impact your emergency savings or your retirement plans?

Instead of guessing, review your budget and see how much room you have for changes. Speaking with an NFCC-certified credit counselor and a qualified financial planner can be worthwhile to determine how much room you have for new expenses.

Depending on what you find, you may determine that you need your children to chip in a set dollar amount in order to make the arrangement work. 

2. Establish house rules

When you live with your children or parents, there are several types of arrangements that might work. You can set up anything from a landlord/tenant type relationship to a roommate or guest-like agreement.

Regardless of what you decide, all adults living under the same roof should be on the same page. Before the move-in, make sure to communicate your expectations for how each of the following will be split:

• Rent or mortgage payments
• Utilities
• Groceries
• Child care
• Transportation costs
• Use of vehicles or other property
• Responsibility for household chores and repairs

If you decide to accept rent, be aware of the potential tax implications and consider consulting with a tax professional beforehand.

3. Define your timeline

If you’re in a rental property, there is likely a limit on how long you can have guests. If not, you’ll want to consider how long you can reasonably afford to share your home and living expenses.

Whether it’s for months or years, communicate your expectations to your loved ones in advance. Then, as time passes, be sure to revisit the subject together and discuss any changed expectations.

4. Have a family meeting

Before adult children or extended family members move in, get the new household together for a discussion.

Start by letting your child or relative talk through why they want to move in, whether they have financial goals tied to the living arrangement and how long they plan to stay.

Share the structure you envision, including the payment arrangements you would consider. No matter what agreement is struck, it should begin with a full discussion of needs, preferences, financial terms, and most of all, ways to make the arrangement successful and smooth.

Once everything is settled, keep communication going – boomerang families have unique, ongoing financial issues that require continued discussion.

5. Reassess expenses

Before the move-in, it’s impossible to know exactly how your budget will be impacted. So it’s important to keep track of spending once you’re all living together. You may find, for example, that groceries or gas cost more than expected.

Keeping track will help you address problems before they spin out of control. Of course, the benefits of living with family go beyond simple dollars, but you should also know what the arrangement is costing you and be ready to discuss it when improvements are needed.

A living arrangement that works for everyone

Inviting a loved one into your home gives you an opportunity to help them in a variety of ways. If they’re having money issues, you can help them get a financial reset. If you can afford to, you might even save or invest their “rent” and present them with the money to help them pay off debt or get established on their own.

Regardless of the details, the ultimate goal is to make sure everyone is still on good terms when the living arrangement comes to an end. To do that, you’ll need a combination of budget reviews, thoughtful communication with one another, and potentially some consultations with financial professionals.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
Nathaniel Sillin is the Head of Global Financial Literacy at Visa Inc. and runs the company’s financial literacy program in the United States, which includes the award-winning Practical Money Skills for Life and What’s My Score programs. As part of his work at Visa, Sillin is a frequent public speaker and an active voice in the financial literacy community.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.