Just when you were beginning to spread your wings and enjoy your empty nest, your recent college grads are back home. Maybe they are still looking for that all-important first job . Or, perhaps that first paycheck isn't quite as big as they hoped and they are camping in your basement hoping to bank some coin.
You aren't alone. A recent Rubicon Project survey found that 61 percent of parents of millennials are already planning to have their children boomerang home after college and 57 percent wouldn't charge them rent.
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Could this torpedo your retirement plans and financial future? Not if you follow these steps.
Set clear guidelines and establish open communication early. "Having your adult kids move back home can be wonderful if done right, and a nightmare if done wrong. They're your kids, but they're not children, so treat them like responsible adults and make clear you expect them to act accordingly," says Derek C. Hamilton, certified financial planner at Elser Financial Planning in Indianapolis.
How to Invest in Retirement
Consider what this means for your retirement timeline. If accommodating boomerang kids means you have to cut back on your 401(k) contributions or other retirement savings, you may have a problem retiring on time or having the retirement you want, Hamilton says.
"Unless your kids will be able and willing to financially support you as you age, the best thing you can do for them is to make sure your own retirement is financially secure. Keep that in mind if you're considering providing more than just basic food and shelter," Hamilton says.
Don't underestimate the impact on your household bills. Grocery bills may go up dramatically. "For some reason, even adult children on a diet can consume much more per person. It may be because some people cook a full meal when there's a family around, or some people do the reverse and buy much more packaged and prepared food and snacks," says Danielle L. Schultz, fee-only certified financial planner at Haven Financial Solutions in Evanston, Illinois.
"Kids are also heavy users of electronics and therefore more electricity, tend to leave lights on, and take long showers," she says. "Having kids may mean having another car, or only seeing your regular car when the gas tank is on empty."
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Gently begin to break the parent pays for everything cycle. "It's very hard not to continue to help the kids – especially if they really are looking hard for a job, or working hard in one and trying to save money," Schultz says.
Write out an agreement. "I strongly recommend a written agreement before the kids move home or very shortly thereafter. It really helps to get expectations clearly in front of everyone, including cost and upkeep sharing," Schultz says.
Use it as opportunity to teach your kids to budget. Make them responsible for a certain part of the household budget , for example the electric bill, says Manuel Andrade, senior vice president of wealth management at People's United Wealth Management in Bridgeport, Connecticut. "Demonstrate the added cost since they have moved back home. Have them look for ways to reduce electricity usage. This would bring the issues of income, budgeting, and spending full circle, and it could instill some lifetime habits," Andrade says.
Charge them rent (of some sort). Charging rent doesn't make you a bad parent, Hamilton says.
Unemployed kids can contribute. Think painting the porch, cleaning grout, lawn mowing and snow removal. "If a cleaning lady costs $70/day, that's what it's worth. If it costs $30 to have the lawn mowed, that's what it's worth. I remind all parents that the kids will have to do all these tasks and pay rent if they had their own place," Schultz says.
9 Steps to Take Before Retirement
Don't reduce your retirement savings. "The kids should now be at a point where they fit into your life, not that you fit into their needs anymore. When we are raising them, they're dependent children. They should now become independent adults with a benefit of very low-cost rent," Schultz says.
Stay focused on your retirement goals. Use automatic withdrawal for retirement savings .
"If the parent isn't already doing this, they should. It's far easier to make one decision – setting up the withdrawal – than decide every month to make a deposit. If you truly don't need the rent money, collect it anyway and stash it in a savings account for the kid for a wedding, first apartment, or emergency fund they don't know about yet," Schultz says.
Draw some lines about what you will and won't pay for. For example: "They need to earn their own beer money," Hamilton says.
"Your kids may think moving home means they'll be guests at a free all-inclusive hotel. Unless they're paying you hotel rates, they have it exactly wrong. Don't hate having your kids move back. Make sure it benefits you as much as them," Hamilton says.
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Own your retirement goals. No one else has that responsibility, Andrade says. "Without proper planning and responsible saving, they may not be able to afford their desired retirement lifestyle. Ultimately, they risk being a burden to their children in retirement for having not paid themselves first."