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Because of the recent recession and continuing economic weakness, more and more adult children are still living with their parents or have moved back in with them. In fact, the percentage of 20 to 34-year-olds who live with their parents jumped from 17 percent in 1980 to 24 percent during the recession, according to a USA 2010 survey. The rise was greatest for adults under 25, with 43 percent living at home.
How can parents navigate the challenges, financial and otherwise, of living with these “boomerang kids”? The California Society of CPAs offers some smart ideas.
The living situation will work best if both parents and child have a complete understanding of what the other expects. Parents should determine up front exactly how much the child will contribute to household costs and what their responsibilities around the house will be. For example, will they be expected to pay rent? Help out with utilities costs? Will they pay for their own food and make their own meals or eat with their parents? Who will care for—and pay expenses for—the adult child’s pets or children?
These are the kinds of questions that should be addressed early on. Parents may even consider putting together an informal contract that spells out these and other appropriate details.
Understanding expectations is particularly important if the adult child is not working. In this case, will the parents pay his or her expenses and provide pocket money? If they will, should it be considered a gift or a loan? How long are the parents willing to help out financially this way? How much time do the parents expect their child to spend on job searches or in jobs that aren’t in the child’s chosen field but that do bring in cash?
These can be uncomfortable issues to raise, but addressing them will contribute to a better living situation. Once rules have been established for the level of support, all parties should make sure they stick to them.
Will the arrangement last indefinitely or will it end at a certain point; for example, when the adult child finishes further education that will qualify him or her for a new job or when the adult child gets a raise to a certain income level?
No matter what the answer, it’s a good idea to discuss short and long-term plans. If you don’t, it could lead to resentment and misunderstandings down the road.
Seeking advice on concerns about boomerang kids or any other financial issues affecting your family? Turn to your local CPA. He or she has the expertise to help you resolve all your financial concerns.
Copyright 2013 American Institute of Certified Public Accountants.