I’m often asked what’s the #1 most important thing parents need to do when figuring out and planning how to deal with the financial costs of adult children living at home. Here’s my answer:
The most important thing parents can do when planning for adult children to move home is sit down and work out a family budget that documents their living expenses. Then, make a best-guess estimate about how those expenses will be impacted by the adult child’s move back home. Expenses like food, electricity, gas, and insurance will likely all increase. Share this information with the adult child so that they understand their financial impact on the household — many adult children are under the mistaken impression that their stay at home is “free” for everyone. Talk about how the adult child can contribute to the additional expenses.
I recommend all adult children living at home pay some rent, partly to offset the
additional expenses, but also to maintain the routine of having a monthly financial responsibility and to help maintain their self-esteem as a contributing member of the household. If they have no income at all, they can earn their rent by contributing manual labor around the house, especially to tasks the parents would otherwise have paid for, like washing the car, painting the garage, and so on.
And one key thing: Parents should never put their own financial well-being in jeopardy to support an adult child. Adult children have many more earning years ahead of them than their parents, who may be struggling to save for retirement.