Last week, we discussed the steps new college graduates can take during their “boomerang move” home for the most financial benefits, not only for themselves but also for their parents.
Parents: That’s right – having your adult child back in your home can be a financial gain, unlikely as it sounds. At first glance, it seems like even after a college education that comes with great investment on your part, your graduate still relies on you to pay for their expenses. While this is true to some extent, a 2011 Pew Research Center survey found 75% of adult children living at home contribute to household expenses, and 35% pay rent to their parents.
But such an arrangement is not always easy to make – many parents are not familiar with discussing money contribution with their children, making the ideas of monthly rent or splitting the bills seem far-fetched. The key is to look at your grad coming home as an adult capable of taking financial responsibilities. With that mindset, we offer a few tips to help parents make the best of their grad’s “boomerang move”:
- Revise your previous financial plans – Among the first things to do is to look at the possible impact this change can have on your retirement plans. Will the increased expenses for an extra person in the house reduce your monthly contribution toward retirement, and by how much? This might require enough number crunching work that we suggest you go to a financial professional. Your company might also offer assistance in refining your retirement plans. Ideally, this step should be done before you consider letting your grad move back in.
- Determine increases in costs – Take detailed notes of the expenses that will increase with the move (food, electricity, Internet and cable, maintenance…). Have several suggestions of how your grad can help offset these costs (through monthly rent, splitting or alternating to pay bills…). Contribution can also be in form of chores – lawn care, cleaning, maintenance… – since they can help lower cost in hiring services.
- Talk about rules and expectations – As you figure the logistics, think about your expectations for your grad as another adult in the house. How long do you expect the stay will last (it is your home)? How much at the least do you expect your grad to contribute? What do you expect in terms of employment? Do you expect your financial help during this time, if any, to be repaid? etc. Once you have the answers, discuss them with your grad as soon as possible following the move-in. It is important to keep expectations practical within the current economy, and to remember that as an adult, your grad will also have expectations for you. Stay open and flexible – aim for agreements that can reasonably meet financial abilities and expectations from both sides.
- Focus on supporting financial independence – The “boomerang move” can be an advantageous transition for your grad to learn how to manage money and be financially independent. Think of ways you can steer your support toward this direction – instead of providing help with money, do so in form of advice. Work out the first bills together, talk about your experience when you started financing for yourself… – activities like these are practical financial lessons for your grad, and also a chance to spend time together.
- Allow time for adjustment – Much like parenting, preparing your grown-up child for “financial adulthood” is a process that is different for each individual, each family. Having your child moving back in as an adult is also new to both you and your grad. It’s important to be flexible as new scenarios develop, and to maintain open communication.
Despite the negative connotation it might have, the decision of many college graduates to move back home can be a financial opportunity for both the grads and their parents. With tips in this two-part series, we hope to help you prepare for this change in your best financial standing.
Let us know of any ideas, further tips and questions you have by commenting below!