If you have an adult child living at home, you’re not alone. Nearly 33 percent of young adults ages 18–34 live with their parents, according to a 2015 study by the Pew Research Center. It’s a phenomenon that dates to the financial crisis, but despite the recovery and a stronger job market, fewer young adults live independently now than they did during the height of the Great Recession, Pew reports.
Some of the reasons are societal: Young people marry later, and parents may be more likely to encourage their children to live at home than a generation ago. Economics also play a role: Young people generally have higher unemployment rates and earn lower salaries. Plus, about two-thirds of college graduates have significant student loan debt, with an average balance of more than $27,000, according to the College Board.
Not surprisingly, the Federal Reserve notes that this heavy college debt burden increases the number of young adults living at home. Plus, young people today face a lending environment that’s more conservative than it was before the economic crisis, making it harder for them to qualify for loans.
For parents, having grown kids at home can create stronger family bonds, but it’s important to be conscious of the costs. More than a quarter of parents say they’re the primary source of support for their adult children, according to Pew.
Whether your child is part of the boomerang generation—having returned home after graduating from college or completing a stint in the military—or never left, here’s how you can watch your finances while helping your son or daughter prepare for the future.
Encourage good money habits
Nearly 70 percent of parents spend at least $1,000 a year on their adult children, and 30 percent spend $5,000 or more, according to Money magazine’s 2014 “Americans and Their Money” survey. If you shell out hefty financial support, take time to educate your child about budgeting and saving.
Helping your child understand the importance of creating a budget can give him a leg up, especially since just 39 percent of U.S. adults establish and maintain budgets, according to a 2014 Experian study. Consider giving him a lump sum or an allowance, for instance, and helping him track where his money goes.
No matter what, your child should not incur new debt while living at home and should focus on paying down existing debts. For example, does he need to pay off student loans? Does he have credit card debt? Talk to him about which expenses are necessary and which can be trimmed or even eliminated.
Once he masters managing a budget, help him develop more advanced money habits such as weighing whether to pay back student loans early or save money for the future.
Set rules for living at home
While your child lives with you, make sure he knows the ground rules. For instance, make it clear whether you expect him to pay a portion of the rent, utilities, food or gas for the car. Talk about which expenses you take on and discuss the expectations you have for your young adult living at home, including how he can help with the household chores.
Discuss career plans
Talk with your child about career goals. If your child doesn’t have a job, what are his plans for getting one? Know how long your child plans to stay with you and make sure that time frame works for you.
Encourage your child to work toward career goals, and discuss using the opportunity of living at home to take an internship or part-time job. Help him understand it’s important to prospective future employers to see progress toward career goals.
Don’t neglect your retirement planning
Take care not to jeopardize your finances and retirement while helping your child. It may be tempting to pay your child’s student loans or cell phone bill, but do so only when it doesn’t negatively impact your own plans.
Remember, if you make big sacrifices for your child now, you may find yourself facing your own financial challenges in retirement.