There’s a lot of debate about how to teach children to become financially responsible adults.
Should you give them an allowance? What about paying for grades or chores? Is it wise for a teenager to get a credit card?
And should you permit your young adult child to move back home to regroup financially after college?
The latter is the land mine I stepped on recently when I encouraged parents to allow recent graduates to come home and live rent-free so that they can save and/or pay off student loans.
You would have thought I slapped somebody’s mama.
“Are you crazy?” Michelle from Virginia Beach wrote. “Our own child floundered a bit after dropping out of [an engineering program] in his sophomore first semester. By junior year, he was back in it and doing great. We have plans to retire, not support a full-grown man in perpetuity because his degree was as useless as a snowsuit in July.”
I have a regular Color of Money feature called “Talk Back,” in which readers get to respond to issues I’ve raised. Lots of folks had something to say about millennials moving back home.
One reader wrote that my advice smacked of “helicoptering in perpetuity, wrapped in the cloak of student debt.”
The person added: “What about the parents’ retirement savings and dwindling resources? What about the character-building experience of young poverty and real life?”
Another said: “The smartest thing these debt-ridden kids will do is get married at a reasonably young age, defer having children while they pursue careers to pay off their debt. Sponging off your parents until you marry at 28 is about the worst advice I’d give any young person I cared about.”
Other folks didn’t like that I encouraged parents not to charge rent.
“I disagree that the return should be rent-free if the parents don’t need the money,” one reader wrote. “On the contrary, charging some rent, even if below-market, provides a transition into the real world. There will always be situations and/or decisions in ‘real life’ that threaten the rent or mortgage payments, and the kids might as well get used to having their housing always at the top of their budgeting decisions.”
One Virginia reader asked some good questions about the conditions under which young adults should be permitted to return home. Would they be allowed to drink or have a significant other stay overnight?
Speaking on behalf of his or her spouse, the reader wrote: “We agree that, post-graduation, many children face situations where apartment costs are high and job opportunities may be very limited. Our concerns have to do with the possible negative effects on your children on returning to the parental nest. It also raises questions about what kind of behavior you as parents are ready to accept. Under the rubric of saving them money, are you really trying to protect them for their own good, or only postponing or even stunting their necessary development in an insidious way?”
I’m a financial pragmatist who has helped a lot of young adults try to figure out how to pay basic living expenses while carrying a load of education debt. For some, the monthly loan payment is equal to their housing expense.
A lot of millennials are stressed and overwhelmed. They aren’t looking to run away from responsibility. They just need more time to establish themselves financially.
For many — those who have the option to return to their parents’ home — cutting out the biggest expense in their budget gives them some breathing room to dig out of a hole. If they launch debt-free or close to it and then can spend their early adult lives saving rather than struggling unnecessarily, that’s a win for everyone.
To be clear, I did not suggest that parents take care of their adult children indefinitely or tap their retirement accounts. On the contrary, I laid out a six-point, tough-love plan for parents to help put their children on the road to move up and out. I urged parents to establish some rules of engagement before welcoming their graduates back under their roof. You can’t let them return without any accountability or an exit strategy.
Long ago, multigenerational living was the norm. It wasn’t seen as a financial failure but a necessity. We have an economy where wages are stagnant and the cost of living in some areas is sky high.
Shared housing doesn’t have to stunt your young adult’s financial growth. If done correctly, you will have taught your child that it’s okay — and even expected — that family members can lean on each other.