Moving Back Home: A Win-Win Situation

Recessions, or economic down turns, can leave millions of people without jobs, and millions more scrambling for ways to cut costs and save money. Younger workers and recent college graduates will be hit especially hard, which will lead to a number of them moving back in with their parents, at least until they can find another job and recharge their finances. Parents who find their grown children back on their doorstep soon discover that living with their kids as adults is a different proposition than when they were younger. However, the situation can be beneficial for both parties if handled correctly. This article explores some of the measures that can be taken to ensure a mutually satisfactory and profitable living arrangement.

SEE: New Grads: 4 Reasons To Not Leave The Nest

You Can Go Home Again
The Census Bureau reported that as of 2011, a whopping 14.2% of Americans between the ages of 25 and 34 are currently living with their parents - about six million young adults. Some haven't moved out of the house for the first time, while others are "boomerangers" who have moved back in until they can get back on their feet. But regardless of the circumstances, parents need to establish some healthy boundaries with their adult tenants, especially financially. Kids that have been spendthrifts up until now can be required to clean up their budgets if they are to stay at home. This can be a chance for parents who may have neglected to teach financial prudence to their kids during childhood to help reinforce responsible spending habits as adults.
Split the Difference
Perhaps the most obvious way that parents of adult children living at home can help is to charge them lower rent, or else put at least a portion of their rent in a savings account for them. Then, when the time comes for them to leave, this money can be refunded to help them get re-established. This strategy could perhaps be combined with an incentive plan for financially irresponsible children; those who are able to create and stick to a sensible budget and perhaps accomplish other goals, such as retirement of debt while under their parents' roof, can see their rent go into a savings account, while failure to do so results in their rent going into their parents' pocket instead.

Joe and Diane have a daughter who gets laid off from her job. She has never lived within her means and now has a substantial credit card balance. She asks her parents if she can move back in with them, and they agree on certain conditions. Rent in their area runs about $750 per month on average, so they decide to charge their daughter $500 per month in rent to help her save money. Furthermore, they will be willing to set aside half of this amount every month if the daughter uses the $250 rent savings ($750-$500) to pay down her credit card balance. If she does not do this, then Joe and Diane will keep the entire $500 for that month for themselves.

This provides their daughter with a chance to both save money and reduce her debt - and gives the parents the opportunity to make some rent money for themselves. If their daughter ends up living with them for two years and is able to meet the conditions of the agreement, then she will leave with $6,000 plus $176 in interest (at 3%) in her pocket and will have paid off at least that much of her credit card bill. Her parents will also make the same amount in rental income. Everyone benefits financially in this scenario, especially if the daughter is able to stick to her budget. If not, then the parents will probably gain more than she will.

The strictness and severity of the conditions should be tailored for each situation; the financial habits and condition of both parents and children will be determining factors here. Parents who are financially strapped themselves may need the full amount of rent from their children to replenish their own funds. Adult children who are severely financially dysfunctional may need sterner conditions placed upon them, such as lower rent for the duration of their stay, but immediate eviction if they do not start cleaning up their finances.

SEE: Student Loans: Paying Off Your Debt Faster

Help with Job Hunting
Parents who take in unemployed children should by all means encourage them to find work again as soon as possible. This may mean requiring their tenants to find temporary employment if they are not able to resurrect their chosen careers within a reasonable time frame. Those who allow their kids to while away the day playing Nintendo are only enabling them to remain as boarders long after they have overstayed their welcome. Recent grads may need more encouragement and help in finding a job while older kids may only need advice and a listening ear.

Moving back home for a time can provide young adults with the chance to learn more constructive financial habits and save money. Parents who provide encouragement and clear ground rules can help their kids get back on their feet and out the door more quickly, and possibly take a chunk of savings with them. The rent money from boomerangers can also benefit parents with depleted retirement savings and tight budgets of their own. A carefully crafted rent and savings program can leave everyone involved better off than before.

SEE: Why Some Kids Never Leave The Nest