Failure to Launch: Setting Expectations When Your Adult Child Moves Home
We’ve had many clients over the past several years welcome adult children back into their home or even purchase a home for their adult child. Unfortunately, this has been a growing trend as our economy recovers from the dregs of 2008. The statistics do not bear mentioning when we can all see this development for ourselves.
While sometimes parents welcome their children back, other times the change affects retirement plans and lifestyle. Let’s take a few moments to discuss how to manage such a situation. As parents we obviously want the best for our children and for most of us this means we’ll do all we can to make sure they are comfortable and getting started on their adult lives in a meaningful way. If they don’t have a job, or aren’t making enough to afford their own digs, then it is up to us as parents to step in; but that doesn’t mean we shouldn’t have a good plan in place. Remember, nobody plans to fail, they merely fail to plan!
Educate your child!
The best thing you can do in this department is to make sure your child is educating themself while in college so that they are not faced with a financial shock at graduation. This means they should probably read our discussions on credit and credit cards and maybe even follow this blog. Your son or daughter may not be applying for a mortgage today but growing his or her own credit will be an important part of taking ultimate control of his or her own finances.
Beyond credit, simple financial management is also an important skill that they should hone while in college. Holding down a part time job, managing an allowance and even being forced to save for big ticket items like spring break airfares or special programs are all part of this education. Establishing and maintaining a true emergency fund might be the perfect first step.
Set the Terms of Engagement
Set ground rules and don’t be afraid to write out a formal contract to ensure all parties clearly understand their roles and responsibilities. Chances are you aren’t as concerned with enforcing a curfew as you were when your child was in high school, but you may not want to be woken up as they come in at 2am, either.
Is this something that you can afford to do? Do you have the actual physical space in your home? Perhaps you’ve moved since your children left the house or you have new medical bills that concern you and impact you financially. Don’t be afraid to speak up for yourself and make sure your needs, and especially your own retirement, are accounted for in whatever agreement you reach with your children. If the arrangement is hurting your retirement plans, let your child know; at times a child may think that your funds are a bottomless pit.
No Such Thing as a Free Ride
Many times, we want to allow our adult children to move in rent free in order to help them save money for a down payment on their own home. There really isn’t anything wrong with this concept but some people may find it difficult to change the status quo in this arrangement if this becomes necessary at a later date. Instead, it is best to charge some amount of rent, even if it is well below market, to make it clear this is not a free ride.
Another suggestion is to have the rent increase at certain intervals. For example, when Johnny first moves home his rent is only $100/month. After three months the rent increases to $200/month and after another three months maybe Johnny is now paying $300/month. It should be clear to Johnny that he has a real opportunity to save some money or seek out the best job but in the meantime he needs to be doing something with his time and continue to prepare to move out at some point in the not too distant future.
Don’t be Bitter.
No matter what, your relationship with your child is the most important thing at stake in this situation. Any agreement has to be mutually beneficial to all parties and it behooves you to do all you can to live up to your end of the bargain as well; this means you should not actively make your home uncomfortable and foreboding for your child. Even though they are saving money they are likely not proud of the fact they’re living at home. If you’re able to effectively manage expectations, both your child’s and your own, the living arrangements should be temporary.