Written by Elaine King, CFP

It’s a tough time to be a young adult. Stagnating wages, inflation, and a possible period of stagflation on the horizon mean that the economic outlook isn’t exactly full of sunny skies and rainbows. For a majority of young adults, these tough economic times mean a return to their childhood home. As of 2020, 52% of 18 to 29-year-olds lived with at least one of their parents, exceeding the previous record made during the Great Depression era.  

Some of the main reasons young adult children return to the nest are job loss, financial hardship, and college campus closures due to Covid-19. So, how can you help your child fly free once again and achieve their full independence? It’s not easy, but the good news is that economic downturns don’t last forever. Plus, with hard work and the right guidance, your child will soon be able to turn things around and succeed, even in the face of difficulty.

Here are some suggestions to help your adult child get back on their feet:

Make a Plan

It’s understandable that you want to support your child as much as possible. Yet, part of that support is helping your child face the reality of adult life. Here are some points to consider:

• Set a Date for Moving Out. With this in mind, your child will have a goal of getting a job and/or saving enough money for a deposit for rent or a down payment. This doesn’t have to be set in stone but will serve as a general expectation that can be reevaluated as necessary.
• Think Twice Before Giving Gifts. It’s easy to fall back into old habits from when your child lived with you before. You may even think to give them an allowance, buy them clothes, or pass them a $20 when they head out with friends. Instead, opt for more thoughtful gifts that will help them advance as adults, such as a financial coaching session or financial literacy class. Or, you might offer to match contributions to a savings account up to a certain amount. 
• Encourage Your Child to Build an Emergency Fund. While living at home, your adult child will be able to save some money on rent and groceries. Even if they contribute to the household (which is a great idea!), it will likely be less costly than if they had to pay market rates. Creating an emergency fund can help your child avoid needing to be bailed out again in the future, helping them build essential financial security that will help them weather tough economic times. 
• Help them Make a Budget. If your child hasn’t learned basic budgeting skills, help them create one. From a simple spreadsheet to using an app like Mint can help your child learn to track expenses and income. Ultimately, the goal is to limit spending and make sure that savings are set aside each month. 

Set Expectations

The recession and inflation affect everyone. If your employment or retirement status has been affected by these changes, don’t be afraid to share this information with your adult child. In fact, sharing some basics about your financial situation can be important to ensure that the household continues to function. You might consider explaining some of the changes that you’ll be making before suggesting contributions that your child might make. For example, you might say “I’ll be packing lunches and taking coffee to work rather than buying, perhaps you could help pay for X item in our budget.” The goal isn’t so much to force your child to pay up, but instead for them to make a symbolic contribution that helps build a sense of responsibility.

You may also want to discuss expectations surrounding:

• Chores
• Visitors
• Curfew
• Damage to the house, furniture, or appliances

Getting Back on Their Feet

Many parents also want to help their children get back on their feet with generous gifts or loans. For example, you may want to pay for your child’s college tuition, invest in their new business, or fund the down payment so that they can purchase a home. Rather than make a complete gift, consider offering to contribute to a portion of these needs. Or, for example, offer to pay your child’s college tuition as a loan that can be paid back at a very low-interest rate in twenty years. This way, your child has the opportunity to show responsibility without being on the hook for a higher, more strict bank loan. 

Ultimately, each family is different and you know your child and your relationship with them. Take comfort in the fact that you’re not alone. Many families are navigating this same situation right now! Before you know it, your adult will be living a more independent life. In the meantime, enjoy the closeness you can enjoy while living in the same home again.