How to Deal Sensibly with Boomerang Kids

Did your twenty-something kids return to the roost? You’re not alone.

Millennials are the largest cohort in the Canadian workforce, according to 2014 data from Statistics Canada. And in ordinary times, the fact that 36.8% of our employees are between the ages of 18 to 34 would suggest that many of those young adults have moved away from home to live on their own, with roommates or with a spouse.

But these aren’t ordinary times. According to the most recent Statistics Canada census, 42.3% of people in their twenties lived at their parents’ homes in 2011. That’s well up from 32.1% in 1991 and 26.9% in 1981.

And data from a recent Pew Research Center survey, reflecting the earlier Canadian data, suggests that the trend is continuing. For the first time in at least 130 years, young people in the United States between the ages of 18 and 34 are more likely to be living at home with their parents than in any other living arrangement. The study found that 32.1% of Americans in that age bracket were living with their parents.

This isn’t just a North American trend: It’s evident across much of the developed world. Pew Research notes that according to Eurostat, the European Union’s (EU) statistical agency, nearly half (48.1%) of 18- to 34-year-olds in the EU’s 28 member nations were living with their parents in 2014.

They’re sometimes called boomerang kids. The trajectory of a child’s life used to be set in stone — grow up, fall in love, leave home and either get married or move in with a roommate or romantic partner. But that tide has turned and Millennials are more apt to leave, go to college or try their luck in the working world — and then return.

The question is, why? Millennials choose to go back home for many reasons, including:

• A weak job market,
• Low earnings,
• Staying in school longer to compete effectively in the job market,
• Large college debt,
• Escalating housing costs, and
• Postponing marriage.

“Helicopter parenting,” where parents hover over their children and micromanage their lives, may also be a factor in the Millennials’ decision to linger longer at home.

One serious downside for the parents of many Millennials is that they wind up in a sandwich, emotionally and financially supporting both their children and their own parents. One or both of these situations can take a chunk out of retirement savings and delay or tarnish their golden years.

A 2015 survey¹ commissioned by CIBC found that one in four Canadian parents surveyed said they spent more than $500 a month to help cover expenses of their adult children, including:

• Free room and board (71%),
• Groceries and other household expenses (47%),
• Cell phone bills (35%),
• Monthly car payments and other vehicle-related expenses (23%),
• Subsidized rent so adult kids can live elsewhere (17%), and
• Help repay loans and other debts (12%).

It is probably no surprise, then, that two-thirds of respondents said their resources were being depleted by their boomerang Millennials.

For many young people, living with their parents is a fiscally-responsible decision that can be an ideal way to save for a house or start a business. However, some observers have questioned whether enough parents are discussing finances and budgeting with their adult children — for example, perhaps they should find a job that may be less than ideal in order to contribute to the household expenses.

If you have one or more adult child who wants to move back, here are some steps to consider taking to help ensure they eventually step out on their own:

1. Share your concerns. What worries you about sharing a house with your child? Do you want your child to pay rent, or cover his or her own cell phone and car expenses? What chores do you expect your child to do? And what does your child want? Vegan meals, sleepovers? Once you come up with a plan, review it every so often to see if everyone’s concerns are being met.

2. Set clear goals, rules and timelines. When your child moves back in, be sure to clarify expectations. Is there an age when you expect the child to leave or an event — such as finding a job — that would trigger a move? Setting these goals and guidelines will help keep your child from overstaying the welcome.

3. Put your financial future first. Decide ahead of time how much money you want to contribute — and can afford — to help out your boomerang kid. You may be close to retirement, or already in it, so don’t back away from requiring the child to help with expenses. The child must be told there are limits on your finances and that your financial security comes first.

4. Keep it short-term. Many adult children may try to hold out for the right job and want to live with you indefinitely. You may want to make it clear that moving back is a temporary fix and set a time limit that you can revisit if necessary.

While your Millennial is still living at home, discuss any of these topics that may apply:

• Paying off debt. Encourage the child to get rid of bills, particularly high-interest debt, so it won’t compete with future rent or mortgage payments.
• Establishing a good credit history. The child should get a credit card for small purchases and pay the full balance by the due date.
• Building an emergency fund. This will help in the case of minor setbacks such as car repairs. The child should build a larger fund when possible to use in the case of losing a job. This can help avoid a return to your doorstep.

Talk with your financial adviser to come up with strategies to help avoid hefty debt and bring your fiscal lives into focus.