Back in the day, living at home as a young adult was somewhat shameful, and notably uncool. These days, however, it's not only stigma-free, but also common practice. Given the number of college students who graduate heavily in debt, it often makes sense for young adults to move back home, save their wages from their first few years on the job, build emergency funds, and get out of debt before tackling the massive expense that is housing.
But while parents should, when the situation allows, welcome their grown kids back home with open arms, they shouldn't do so to the detriment of their own finances. But in a survey by home services company Porch, it costs parents an average of $459 a month to house adult children. That's a lot of money for parents to be giving up, especially those who need that cash to boost their retirement savings.
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If your generosity toward a grown child is costing you money, and wrecking your finances, it may be time to push back. Otherwise, in an effort to help your child get on his or her feet, you could wind up cash-strapped yourself.
Can you afford to be supporting a grown child?
It's one thing to let a grown child live under your roof if doing so doesn't substantially add to your costs. After all, your mortgage lender won't hit you with a surcharge for having more people live on the premises; your monthly payment is what it is, and having an adult child in your home won't change it. The same holds true for your property tax bill, and, in most cases, run-of-the-mill maintenance and repairs -- assuming, of course, that your live-in grown child doesn't drive a bat into your water heater for sport.
But here's where having a grown child live at home can cost you money: If you're constantly paying for extra food to feed that child, extra toiletries and supplies to accommodate that child, and extra entertainment, like an upgraded cable plan or streaming service, to please that child, then your finances are apt to suffer. Also, remember that having another person living at home means higher electric and water bills -- bills you're probably covering yourself.
Rather than give your child a totally free ride, ask him or her to chip in for some of these costs so you don't wind up spending $459 a month out of pocket when you need that money for more important purposes. Sticking that sum in your retirement savings plan, for example, on a monthly basis over three years, and then leaving it alone for another 10, will boost your nest egg by about $35,000, assuming you invest it at an average annual 7% return (which is a bit below the stock market's average). And that extra money could come in very handy if some of your retirement expenses wind up being costlier than anticipated.
Another thing you can do with that money? Use it to pay off your mortgage. Entering your golden years without debt of any sort will give you more flexibility once you move over to a fixed income, and the sooner you pay down your mortgage, the less money you'll give away in interest form.
Housing a grown child is a nice thing to do, and living at home is a smart thing to do for young adults who want to build savings and knock out some debt before venturing out on their own. Just be sure that having your child live at home isn't costing you an unreasonable amount of money. And if it is, set ground rules to avoid being taken advantage of.
