Have you recently gone from an empty nester to, well, a not-so-empty one? You’re not alone. Pew Research Center shows nearly one in three millennials are now living at home with the folks. Sure, we’ve heard about the boomerang generation before, but this is the first time this number is greater than the number of young adults who live with a spouse or romantic partner. (It seems more millennials are choosing to settle down romantically after age 35.)
If or when you welcome back children into the nest, there are more things to consider than just reverting your temporary home office or gym back into their bedrooms. Here are a few to keep in mind:
Your life insurance
Life insurance needs can change up to nine times over the course of a lifetime according to Jeff Waddle, a New York-based State Farm agent. Junior moving back home happens to be one of them. You may have planned to scale back on your coverage, because your retirement cache was nicely full, college was taken care of and your dependents were no longer, well, dependent. If your kids are still depending on you for shelter and other support, you have to hold onto that coverage.
How do you figure out how much you need when? I like to defer to calculators for a more personalized estimate. (PolicyGenius has one here.) Another factor to keep in mind: student debt. If your child happens to be a recent grad with a hefty amount of student debt — particularly if you co-signed on some of that debt — then life insurance can satisfy your part of the liability just in case. (The average class of 2016 graduate walked off campus with roughly $37,000 in student loan debt.)
How will your expenditures change with another person in the household? They'll likely be higher in the form of grocery bills, utility bills and, if they're using the car, perhaps more on auto insurance (yes, you should add them to your coverage if they don't have a policy of their own). What you don't want to do is allow this move to get in the way of your own retirement saving (according to research from Northwestern Mutual, 62% of Americans say they expect to delay retirement primarily because they're not saving enough).
So, sit down with your child and talk about how they can contribute to the household budget. There are many different scenarios that precipitate a move back home, but your offspring should be able to cover their personal expenses (clothing, cellphone, gas), as well as defray some of yours, all the while saving for a move back out on their own. Should you charge them rent? That's a personal call. Housing typically represents about 35% of a person's budget. If your child doesn't have to cover that line item at all, they should be able to sock away considerably more.
Their launch date
Avoid a complete failure to launch by helping them achieve financial independence — and remember, there’s a good chance they don’t know how to handle their money yet. Research from the Arizona Pathways to Life Success Project shows that even if your children have full-time jobs and incomes, it doesn’t mean they know what to do with it (especially where their savings are concerned). As soon as they move back home, sit down and draft a list of goals with them.
Goal number one: the date they’re going to move back out. Help them figure out how much they’ll need to save to do it (i.e. how much will they need to set aside for security deposit, first and last month’s rent and emergencies) and set up automatic savings into a separate savings account dedicated to it. The keyword here is "help." Do it with them, not for them, so that they learn.
With Kelly Hultgren