Setting Financial Boundaries for Returning Kids

WASHINGTON – One in 3 adults between the ages of 18 and 34 are living with their parents, according to the U.S. Census Bureau. Several economic factors are leading adult children back home, including student loan and credit card debt as well as rising rents.

Bobbi Rebell, 54, chief executive officer of Financial Wellness Strategies, knows about the financial challenges multigenerational households face. She briefly lived with her parents as a young adult, and her two adult children lived with her and her husband for two years after graduating from college.

Rebell says establishing boundaries was tough at first because she paid for most of her children’s living expenses. Worse, they didn’t follow her financial advice.

"It was hard, and I had setbacks," she says. "I was telling them to set up a Roth IRA as they were walking out the door."

Rebell eventually realized that she had to treat the young adults more like roommates than children and let them manage their own money.

Rebell notes that once your adult offspring move back home, you and your kids will need to decide how much they’ll chip in for household expenses. They can contribute a percentage of their wages to cover the mortgage or rent, for example, or agree to pay a set amount— say, $200 to $300 a month.

However, Rebell stresses that the amount your kids should pay depends on their financial situation and how much they want to save to eventually move out.

If your children can’t help with the mortgage or rent, consider having them pay a portion of utility, phone or insurance bills. If you’re giving your child money to help with their personal expenses, such as car payments or health insurance premiums, establish up front whether the money is a loan or a gift.

To make sure the terms are clear, you may want to put your financial arrangements with your children in writing.

Parents should also talk openly with their children about setting a deadline for how long they will live at home. Although you may want to support your children through their financial difficulties, you don’t want them to be dependent on you for too long.

"Tell your kids you’re not a bottomless pit of money," she says. "You have to build their confidence so they can eventually make it on their own."

Consider asking your children to set a target date for saving enough for a security deposit and several months’ rent, or a downpayment on a house.

If your children have credit card debt, they can also set a goal to pay it off by a certain date.

The more quickly they pay down their debt, the less they’ll owe in interest.

And by lowering their card balances, they could improve their credit scores, making it easier to lease an apartment or buy a house.

Take care of your own finances too.

More than three-fourths of parents who support adult children financially say it affects their own finances, according to a survey by Intuit Credit Karma.

Thirty percent say it has limited the amount they save for retirement.

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