You Can Go Home Again, at Least for a While
6You Can Go Home Again, at Least for a While
Originally published on eHow.com, July 13, 2011
Although it may be a bit crowded for a while, living at home can yield financial dividends for parents and their child.
When graduates move back home, they have a valuable opportunity to get ahead by saving the money that they would otherwise pay in rent. This arrangement can not only provide them with a pool of funds to use when they move out, but can also help them to learn how to budget effectively with a bit of parental instruction.
— Shashin G. Shah, president of SGS Wealth Management
Many college graduates are hit with a cold dose of reality soon after the euphoria of completing their coursework subsides. Graduation parties, gifts and ceremonies give way to resumes, cover letters, interviews, networking and, in many cases, either the frustration of extended unemployment or long hours of work for minimal pay.
While moving back home to live with Mom and Dad after graduating from college may not sound like much fun, the financial rewards can be substantial. The move can help alleviate some of the financial frustration for not only the graduate but also for parents, who may have fallen behind in saving for their retirement while they devoted at least some of their resources toward launching their graduate into the world.
The key to making this arrangement work is establishing a pact that allows both parties to move forward financially while maintaining their respective lifestyles.
Financial Benefits for Parents
Parents of college grads who move back home may want to consider a few different options when it comes to charging rent. The first option would be to charge a lower amount of rent and pocket the money. This helps parental landlords either recoup some of the money they spent helping their graduate through school, or it simply beefs up their own balance sheets.
Another possibility is to charge the graduate a higher amount of rent, which could be placed into an escrow account and returned when the time comes to move back out.
Of course, some combination of these two strategies could also be implemented to benefit both parties. Part of the rent could go toward the parents and the rest could be funneled into savings for the grad.
Having a grown child living at home can pay other types of financial dividends as well. If parents have various projects that need to be completed on their home, the graduate may be able to assist or even accomplish some of them for free or at a greatly reduced price. For example, if you’re willing to forgo rent for a couple of months, then a graduate who is handy with a paint brush might be persuaded to repaint the house. Parents can effectively avoid having to either undertake a job themselves or pay a few thousand dollars to have it done professionally. Those who live in rural areas may have a great deal of regular work that needs to be done around a house or farm; free room and board in exchange for help with those duties may be an ideal exchange.
Is Living at Home Again Right for You?
Although moving back home can be a real shot in the arm for your budget, it is not a feasible alternative for every graduate. Before a child takes up living space in an old abode, she should ask these key questions:
Do I have a good relationship with my parents now?
Will I be able to deal with them putting pressure on me to find a job?
Do I have any idea how long I will probably be here? Do I have a specific plan to find a job, get a better one or obtain higher education?
Am I prepared to help my parents maintain their house in my spare time?
Will I be able to pay my parents rent if they ask for it?
Is there a maximum amount of time that I will stay here?
Did I have major conflicts with my parents when I was younger that never got resolved?
If the answer to one or more of these questions is “no,” then this strategy may not work for you. If moving home is an absolute financial necessity, then it may be wise for you and your parents to have a session or two with a family counselor before moving forward.
Financial Benefits for Graduates
The majority of graduates who move back home do so to reduce expenses. Those trying to save money should map out a budget to ensure that the money saved on rent is used productively. In most cases, this means that money that would otherwise go toward rent could be used to save for an upcoming major purchase such as a car or house or to pay down credit card debt or student loans.
“When graduates move back home, they have a valuable opportunity to get ahead by saving the money that they would otherwise pay in rent,” says certified financial planner Shashin G. Shah, president of SGS Wealth Management. “This arrangement can not only provide them with a pool of funds to use when they move out, but can also help them to learn how to budget effectively with a bit of parental instruction.”
This dual benefit gives homebound grads a head start on other financial goals, such as paying off credit cards or perhaps furnishing an apartment or purchasing a vehicle. Graduate school students may find that living at home allows them to keep up with their current expenses while they finish their upper-level education, thus leaving only student loans to contend with once they’ve earned their advanced degree.
Although parents are veterans at dispensing advice to their children, this is not always a good idea when it comes to finding a job.
“The rules and avenues of job-hunting today are a great deal more complicated than they were a generation ago,” warns Sheila Curran, owner of Curran Career Consulting. “What worked for graduates seeking employment in the ’70s or ’80s is often no longer relevant. Employer perceptions and attitudes about new hires have changed dramatically over the past 30 years.”
Strategies and techniques that once helped parents find their way in the workforce may not be helpful for their children today. But parents still need to offer their support and recognize that while finding a job can be a challenge in any generation, their children face a job market that differs fundamentally from their own.
Set Some Ground Rules
Parents who allow adult children to move back in with them need to set some clear ground rules. Of course, this arrangement will be unlike when their children were in high school and they had to obey curfews and other rules that no longer apply. Still, parents should ensure that the returning graduate does not assume a semi-permanent state of unemployment
Graduates might be expected to materially contribute to the upkeep of the household in some fashion, either financially or by doing chores. Parents can create incentives for their graduates to find a job, such as refunding some or all of any rent that is paid, or charging no rent for the month if the graduate devotes sufficient time and effort to job-hunting or makes progress toward landing a job.
Moving back home will undoubtedly present some relational challenges for both parents and grads. Both parties need to sit down and address their expectations thoroughly to minimize potential friction and respect each other’s boundaries.
In some cases, lifestyle differences or other issues may be too great to overcome. But the financial rewards for this arrangement can be substantial for both sides with proper preparation and sensible boundaries.
“Most of my clients in this situation did not take the time to thoroughly discuss exactly what was expected of each party,” says Linda Stiles, a therapist in Overland Park, Kansas, who counsels many families in this situation. “In most cases, I will help my clients clarify expectations, negotiate differences and create a written plan or contract that clearly spells out a living arrangement that everyone can live with.”