"Boomerang kids." It sounds like a TV reality show: Kids grow up, kids move out, kids get into financial trouble, kids move back in with Mom and Dad.
In real life, there's nothing particularly entertaining about adult children moving in with their parents. The situation is often a response to a financial or life crisis, and it can result in family tension and conflict that is anything but funny. For anyone considering this option, here are some important points to think about and discuss ahead of time.
1. Have a clear end in sight.
Don't allow adult children who are in financial trouble to move in "just until he/she gets back on her feet." This vague arrangement is asking for trouble. Instead, assess the child's circumstances together. Agree on clear goals, such as paying off credit card debt or finding a full-time job. Establish a clearly identifiable trigger for moving out, such as, "three months from the date you find a full-time job." An open-ended agreement based on paying off debt or accumulating a certain amount is too easy to extend indefinitely.
2. Charge rent.
If the goal is to help the child save money, charging rent seems counterproductive. Yet it is important for adult children to contribute to the household expenses, and even more important for them not to get used to a budget that doesn't include rent. Check local ads to find out how much rent is fair for a sleeping room with kitchen and laundry privileges. Then add in a reasonable amount for groceries and other expenses. This ought to be less than the cost for a one-bedroom apartment. If you can afford it, you could even stash the rent in a savings account and give it back to the child as a surprise moving-out gift.
If the child is in such financial crisis that paying rent is simply not possible, agree on services like cooking, yard work, and housecleaning in lieu of rent.
3. Agree on a recovery plan.
Help the child create and agree to follow a bare-bones budget. It might include commitments to buy clothes at second-hand stores, get rid of car payments by replacing a more expensive car with a clunker, and spend only a very small allowance on entertainment. It's also essential to agree on consequences for not following the plan.
4. Focus on learning and changing behavior.
If the child is in trouble because of destructive financial behavior, it may be appropriate for parents to monitor spending and make sure commitments are being kept. Do your best to do this as a mentor and teacher rather than being punitive. Focus on one issue: How can this experience help you learn to manage money differently?
5. Put it in writing.
Beware of unvoiced expectations and unwritten "contracts." Have your agreements in writing. Include everything from moving-out deadlines to use of the parents' cars to rules about entertaining and overnight guests. Include the same issues you would cover if you were renting space to a stranger.
6. Don't give until it hurts.
Be realistic about what you can afford. Don't spend your retirement fund or borrow to help an adult child. In the long run, sacrificing your own financial health is harmful for all of you.
All too often, parents who allow adult children to move home end up enabling them to continue destructive money behavior and postpone learning important financial lessons. Sometimes it's better to offer counsel instead of living quarters. This is a very individual decision. Finding the right answer means focusing on how to provide a helping hand rather than a handout.
Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota's first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today.
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