It’s all Fiscal: Adult Children Moving Home

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Adult Children Moving Home

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Did you know that according to a Pew Research Center Report, our modern society has the largest number of Americans living in multi-generational households ever? It’s true and the majority of those households are due to adult children returning home, either following college graduation or following a catastrophic financial event, such as divorce, job loss, foreclosure or bankruptcy. In fact, it’s believed 12 million households have kids who left home, but returned. If Mom and Dad are known as the generation of baby boomers, their kids are known as the generation of “baby gloomers”. One of every four young adults between the ages of 18 and 24 indicated that they had returned to live in their parents’ house after being independent; one in five of those between the ages of 25 and 34 reported the same.

No More Options

First things first, these are not voluntary moves. This isn’t a generation of lazy folks who miss Mom’s pot roast and free laundry service. These are professionals who are educated and who have successfully, up until a certain point, managed their lives. And unless you’ve been on snooze alert for the past few years, you know the economy has created millions of folks whose options are very limited. In fact, only 54% of Americans who are between the ages of 18 and 24 are employed. This is the lowest rate recorded since the government began keeping records in the late 1940s. Not only that, but when they are able to move back out after regrouping, it can take anywhere between 10 and 15 years to make up for that lost income. This, according to a new report from the Economic Policy Institute, reveals just how big a long term crisis this is.

And for those who think a college degree is the solution, think again. Most are leaving college with thousands in student loan and credit card debt. Worse, many buckle under the pressure and while they can’t file bankruptcy on their student loan debt, it could be a massive wave of bankruptcies on credit card debt could be in the near future. This, of course, will cause even more problems – both for the one filing and the economy as a whole. Just as many of those young people had no idea what they were getting into when they agreed to the student loans and credit cards, they also have no idea what filing bankruptcy can do to their futures. It eases those financial burdens, but it could also prevent them from landing a job. Many employers are now using routine credit checks as part of their hiring process.

Earning Less

For those who are able to land jobs, they soon discover they’re earning less than even those in 2000 who’d graduated college and entered the job market. It stands to reason, then, that they can’t afford apartments – much less mortgages. And with the average $25,250 student loan balance they graduate with, there’s no income that will support that and a new car loan or mortgage or even an apartment lease. So, they pick up their smartphones and call Mom and Dad.

No one agrees this is an ideal solution, unless, of course, you’re a mom who wants nothing more than to keep your children close by – and while that’s not a bad thing – maternal instincts are powerful – it’s not a healthy long term solution. If, though, there are no ground rules, it can quickly become a cross all members of the family must bear.

Few families insist their young adults pay any kind of rent. That trend is beginning to shift slightly, but for the most part, most parents go into an agreement of allowing their adult children to move back home with the belief they’re saving money and putting their lives together. They hope it will be a safe place to pick up the pieces, pay down credit card debt and student loan debt, and ideally, have them on their way again within a year. When that doesn’t happen, it opens up an entirely new set of problems.

No Empty Nest Here

Many retired parents have found themselves having to return to work again to support a family they thought they’d already raised. The tensions quickly grow as Mom and Dad abandon their dreams of travel and enjoying grandchildren in lieu of basically starting over. The difference being their bundle of joy has a ton of laundry, girlfriends and still has no concept of running the vacuum or balancing a checkbook. In fact, a small number of parents find themselves divorcing after allowing a kid to return home.

I Walked 5 Miles in the Snow

Unless these parents also experienced a similar predicament in their own lives, they are completely unprepared for what’s next. There are some parents, too, who blame their kids for dropping the ball, which may or may not be the reality. There are those parents who “walked five miles to school in the snow” who are disciplined and worked their lives to prepare for retirement. These are the parents who might have credit cards their entire lives, but who never carried a balance from one month to the next. They simply have no patience for what they might believe is irresponsibility on the part of their kids’ decisions.

Victims?

That might not be the case at all, though. Katherine Newman, author of “The Accordian Family: Boomerang Kids, Anxious Parents and the Private Toll of Global Competition” says that a combination of “significant” effects in the labor market may mean that these kids are “likely victims of circumstances rather than self-inflicted actions (on their part)”. She’s also the dean of the school of arts and sciences at Johns Hopkins University, so she knows a thing or two about the mindsets of today’s college graduates.

Parents can relate to their adult children when they’re away from home…But in the home, particularly if it’s the same home, the kid goes from being 28 down to 25 to 20 and ends up at 7.

At a minimum, adult children living at home should contribute a fair share of financial and household responsibilities. It’s more about the gesture often and for those adult kids who do come back home and can remember they’re in someone else’s home – even if it is mom and dad’s home – there’s a better flow of dynamics. Also, those who can actually stick to the game plan in terms of paying down debt will also keep resentment down for many families.

Will the trend continue? It’s likely as more economic news continues to darken the outlook. Until real change is made on a national level, this could become the new American normal.

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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