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When children move back home

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About a third of all adults between the ages of 18 and 34 lived with their parents in 2012 according to the US Census Bureau, an increase of 27 percent from just a decade ago Most parents, according to a recent poll, look at the move back home as being mostly positive but 40 percent also found it financially stressful.  Whether you’re retired now or staring retirement in the eye, it’s important to recognize that you risk your own financial security when you welcome adult children back home.

While the weak economy and the lack of available jobs contributed to the reason, the resulting financial costs to the parents can amount to tens of thousands of dollars per year in additional unplanned costs.  Yet another survey, this one by Pew Research found that nearly half of all middle aged parents provided financial support for their adult children in 2012.  Those costs weigh on parents’ finances, often resulting in additional debt or delayed events such as retirement.  The Wall Street Journal reported that 26 percent of parents with adult age children living at home have taken out loans as a result.  Ann Brenoff of the Huffington Post warns parents that if your retirement isn’t fully funded, you aren’t in a position to co-sign loans or assume more of their debt even if you do offer them a place to stay.

Richard Harter, a financial analyst with AgingOptions, has created a financial model that projects how certain choices can impact your future retirement income.  His financial “dashboard” can help you determine the impact of financially helping your children will on your personal financial goals, whether that financial assistance comes in the way of co-signing a loan, taking out a loan for your child’s education or having him or her move back in to the family home.

No one is suggesting that you don’t help out your child.  Just be aware that allowing a child to return home may only enable that child to continue sponging off you.  A financial hand may cause irreparable damage to your own financial plans and in extreme cases may cause bad feelings with siblings if they feel slighted or shortchanged and of course there are the extreme cases of adult children who rip their parents off.  This isn’t to say that you won’t find that helping your child or children out financially or with space in your home can’t be a positive thing, here’s one person who has.

If you never taught your children the meaning of the word no, it’s not too late.  Harder yes, but not too late.  If you are considering allowing your adult child to move in with you, you should establish some ground rules at the onset.  A group of experts have weighed in and while there are lots of suggestions, here are the recommendations that they come back to time and again:

  • Make them pay:  It doesn’t have to be a lot but they should be contributing to the household finances even if you decide to return that money later on for a down payment on their own place.
  • They need a job:  It’s tough out there, no question but even a job that has nothing to do with their career aspirations will get them moving in the right direction.  If they are looking but so far not finding, have them perform jobs around the house such as painting or lawn work that you might have had to pay for otherwise.
  • Get it in writing:  A contract that spells out how long he or she will stay or how much and what they’ll contribute can help to avoid conflict down the road and provides an opportunity to really look at what moving back home will mean for both parties.

Here’s a list of other suggestions from AARP.

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