Living With Your Parents? Make These 4 Money Moves Today

Use this time to shore up your financial bases and still have money available for fun.

Whether it's a result of soaring prices, debt, the high cost of rent, school expenses, or a desire to save, more and more people are living with their parents. It can make a lot of sense financially, but other aspects of the situation can put a strain on everyone involved. If you're a young adult living with your folks, taking these steps may help.

1. Make a plan

Everybody's circumstances are different. But a plan will help you and your family know that this isn't going to be forever. Try to be clear on why you're at home and set some financial goals, including what moving out will look like. That way, you have a clear end point and it will feel less like you're going backward.

For example, if you're trying to save for a down payment on your own place, think about how much you can put aside each month and when you will have enough. If you're trying to get a job or complete your education, some of those goals might not be financial. That's OK -- the idea is to be clear on why you're doing what you're doing and be able to measure how you're progressing.

Another aspect of planning is to set yourself a budget. Work out how much comes into your bank account each month versus how much you spend. Use that to estimate how much you can contribute toward rent, how much you might be able to save, and how much you might be able to spend on fun things.

The idea of creating a budget can sound both scary and restrictive. Instead, try to see budgeting as a tool that can help you live the life you want to lead. Budgets aren't there to tell you you can't buy the things you enjoy. They are there so you know how much you can spend on those things and still meet your other obligations.

2. Contribute to the bills

You may be living at home to save money on rent and utilities, but it's still a good idea to contribute toward the cost of running the home. Not only will this better prepare you to cover the costs of your own place one day, but it may also ease some of the stresses of being under the same roof. Talk to your parents and try to agree on what would be a reasonable contribution to food, rent, and other household expenses.

3. Build your financial foundations

The current economic climate is not easy to navigate -- on top of soaring prices, many young people are struggling work-wise, and economists warn that we may enter a recession this year. Given that your living costs are probably as low as they'll ever be right now, it's a good time to shore up your financial bases by taking these steps.

Build an emergency fund

An emergency fund is a stash of three to six months' worth of living expenses that cushions you against the unexpected. If you lose your job or you (or one of your parents) face a medical emergency, having that cash in a savings account could make a huge difference.

Pay down debt

Debt is one of the main reasons that a lot of young adults move back home. It's a wise move to cut your costs in this way, as debt can make it difficult to build financial stability. Check out our guide to paying down debt for tips on how to become debt free.

Build credit

A good credit score can make it easier to borrow money and qualify for the best credit cards. Even if you don't plan to borrow, it still matters. Your credit rating can also impact your insurance costs, job prospects, and ability to rent an apartment. There are a few tricks to building your credit for the first time. A lot comes down to opening a starter credit card and paying down your balance each month.

Open a brokerage account

Investing for the future may be the last thing on your mind, but the earlier you put money aside, the longer it has to work for you. Let's say you invest $5,000 when you're 25 years old. The power of compound interest means it could be worth over $100,000 by the time you're 65 if it earns 8% a year. If you invested that same $5,000 when you're 45, it would be worth almost $25,000 when you hit 65. Open a brokerage account and try to invest even a small amount now.

4. Talk openly with your parents about money

Living at home as an adult can be tough for everybody involved. It's hard to undo the habits that started when you were younger and develop new ones. One good way to redraw the lines is to talk to your folks about your money plans. Be open with them about your goals, your budget, and your financial situation. That way, you're less likely to find them criticizing your online shopping habits or complaining when you want to go on vacation.

There's another side to checking in financially. If your parents are sacrificing their retirement goals to help you out, it could lead to trouble. They may be unable to stop working when they want to, or struggle to cover the costs of the care they need. It's one thing for you to live with them so you can save money, but if they're skimping on saving for their old age to help you, it's a different story. It isn't easy, but try to open the conversation and see if there are ways you can help.