If your adult child has moved back home, you're part of a growing trend. In the U.S., 1 in 4 adults ages 25 to 34 live in multigenerational households, compared with just 9% in 1971, Pew Research Center reports. A child living at home can make certain things easier for parent and child alike, but could also become a financial burden for parents. Over half (51%) of parents with adult children at home pay all the rent or mortgage, Pew found; 45% cover all the household expenses, such as utilities and groceries.
To help you manage your budget when adult children live at home, you can take steps to ensure everyone contributes to the household and help your children attain financial independence.
1. Go Over Household Expenses
Sit down as a group and go over the household expenses. This includes rent or mortgage, renters or homeowners insurance, property taxes, utilities, groceries, streaming services, home maintenance and any other costs necessary to keep your home running smoothly. Each person should also make a list of their individual expenses, including health insurance premiums, student loan payments, car payments, clothing and discretionary spending such as entertainment. Finally, you'll list each person's income from all sources so you know how much money you have to work with as a family unit.
2. Create a Communal Budget
Reviewing your household and individual expenses, determine who will pay for what and put it into a family budget. Contributing to the family expenses will give your child some budgeting practice, which will better prepare them to permanently leave the nest. For example, It's common to charge a child below-market rent. You might also want to give them an idea of average rents in the area so they'll know what to prepare themselves for once they move out.
Rent stays the same every month, however, and if your child needs to learn how to budget and save money, consider putting them in charge of an expense that varies month to month. For instance, paying for groceries can teach them how to look for sales, clip coupons and find other ways to reduce costs.
3. Consider Non-Financial Contributions
If your adult child can't contribute to the household financially, figure out how to offset that in other ways. Perhaps your child could take over meal preparation or spend a certain amount of time on housework each week. If you normally pay service providers such as pool cleaners, gardeners, dog walkers or housekeepers, having your adult child take on these chores could save you quite a bit of money.
4. Help Them Identify and Work Toward Goals
There are many reasons an adult child might move back home. A child who's lost a job or gotten divorced may just need a while to pay off debt and get back on their feet. A recent college grad may need a launch pad while seeking a first job and saving money for an apartment. A young couple with a baby may use the time to save for a down payment on a house while the grandparents provide child care.
Talk to your child about their reasons for moving back home. Then have them identify their goals, develop a realistic plan for getting there and set a timeline. Be specific—for example, "Once you get a job, you will need to move out in six months." If necessary, help them find resources that can support their goals. For instance, a child who's having trouble paying bills or managing credit may benefit from consulting a nonprofit credit counselor.
5. Don't Put Your Financial Needs on the Back Burner
A survey by Savings.com found that on average, parents who support adult children financially put 23% more toward their children's expenses than toward their retirement accounts ($605 per month vs. $490 per month). Keep working toward your own financial goals, such as building an emergency fund, creating sinking funds to save for travel or big purchases, and saving for retirement.
6. Set Financial Boundaries
When Junior was a teen, you may have provided money for pizza, movies or other needs and desires. Now that he's grown, however, setting limits on the financial assistance you're willing to provide will benefit both of you. For instance, you may want to set rules for yourself such as:
- Maintaining your contributions to retirement accounts
- Not tapping your retirement savings to help your children
- Discussing financial assistance to children with your spouse before making decisions
If your children need a substantial amount of money, consider making it a loan rather than a gift, and having them pay you back (maybe even with interest).
7. Help Your Child Learn Money Skills
How well can your child manage money? The time they spend living at home can be a learning opportunity to help them develop financial literacy. For example, a recent college grad may need practice in tracking expenses, developing a budget and paying bills on time. A single parent might need to learn strategies to get out of credit card debt or to save for long-term financial goals.
8. Communicate Often and Openly
Hold regular family meetings to go over your family budget and rules and discuss any problems that arise. Check in to see if your child is progressing toward their financial goals, such as saving for a deposit on an apartment. You may need to adjust your budget and your child's goals as time goes on. Be honest about your needs and ready to renegotiate the terms of your family's agreements if they're no longer working for you.
9. Don't Baby Your Child
When children move back home, it's easy to fall back into a parent-child relationship, which can work against an adult child learning money management skills. Let your child learn from mistakes while you provide guidance. According to Psychology Today, warning signs you may be enabling your adult child include:
- Feeling that you're giving up too much to help your child
- Feeling resentful or taken advantage of
- Your child has constant financial crises
- Your child behaves as if you owe them financial assistance
10. Consider Claiming Your Child as a Dependent
An adult child living at home who is a U.S. citizen, U.S. national, U.S. resident alien or resident of Canada or Mexico may qualify as a dependent that you can claim on your taxes.
A dependent child:
- Must be under age 19 (or under 24 if they attend school full time) or totally and permanently disabled
- Must live with you more than half the year (with some exceptions)
- Provides less than half of their own financial support
A dependent relative:
- Can be any age
- Must live with you for the full year or pass the IRS Member of Household or Relationship Test
- Must receive more than half of their financial support from you
- Cannot earn more than $4,300 per year
Make Money a Family Affair
When your adult child finally leaves the nest, having good credit can make it easier for them to rent an apartment or buy a home of their own. Encourage your child to regularly check their credit report and sign up for free credit monitoring. Is your child trying to improve their credit score? Consider making them responsible for the household's cellphone, utility and streaming service bills. If they sign up for Experian Boost®ø, making these payments on time can help to boost their credit score.