Young adults at the beginning of their careers have been hit especially hard by the pandemic. Due to the economic effects of COVID-19, 68% of entry level job openings were eliminated.
This left many new grads without a job or a way to support themselves. As a result, 32 million adult children have moved back into their grandparents’ or parents’ homes since April 2020.
A recent survey showed that most parents are happy to have their kids return to the nest after college. But there is a financial cost to welcoming your kids home. Before you let your kids live in their childhood bedrooms rent-free, consider whether or not you can afford it.
Can You Afford to Let Your Kids Move Back Home?
You probably think that it doesn’t cost that much money to let your adult children move in with you. After all, you have the space and wouldn’t need to move into a bigger home to accommodate them.
But according to a study by Porch, allowing just one of your kids to come back home will cost you $459 per month. Adding another person to your household increases your gas, grocery, and utility costs.
Those expenses can add up and put a big drain on your finances, especially if you would’ve invested the money instead. Putting $459 per month into your retirement account for a decade could give you an extra $79,791 in retirement if it earns an average return of 8%.
If you’re on track for retirement, you may be able to make that sacrifice. But if you’re one of the 40 million American households that doesn’t have a nest egg, you might not be able to afford to take your children in unless you charge them rent.
Charging Your Kids Rent is a Good Financial Compromise
If you have consumer debt or an underfunded retirement account, you may not be able to afford to house your adult children rent-free. But luckily there are ways to help them out without sacrificing your own financial future.
Many parents in this situation ask their kids to help out with bills or charge them rent. Covering the utility bill or paying below-market rent will cost your kids far less than living on their own. They’ll still be able to pay off their student loans or build up savings without putting financial strain on you.
If They’re Unemployed, Ask Them to Contribute in Other Ways
But what if your child’s income source dried up due to the pandemic, leaving them without a lot of spare cash? They can still chip in by doing chores and maintenance around the house. Ask your child to mow the lawn so you can stop using a landscaping service and save money. If you order takeout because you don’t have time to cook, your child can help you out by making dinner.
Encourage them to keep applying for jobs aggressively so they can get on their feet. Even if they can only find something part-time or outside of their degree field, emphasize that it’s better to have some money coming in than none. Although you may love having your kids at home and getting to spend extra time with them, it’s important for them to understand that it’s not a permanent solution.
They still have to contribute to the household and make strides towards becoming independent adults. You won’t be around to support them forever, and you have your own financial future to worry about. So don’t be afraid to set some boundaries and give them a timeline for when you’d like them to move out.
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