The Boomerang Generation – Planning for the Unplanned

Nearly double the number of 25- to 35- year-old Millennials were living with their parents in 2016 than their Silent Generation counterparts in 1964.1 In fact, the percentage of 18- to 34-year-olds living in their parents’ home grew from 26.0% in 2005 to 34.1% only ten years later. Of this group, 1 in 4 are idle, meaning that they neither go to school nor work.2 These young adults are known as the “Boomerang Generation”. When they boomerang back to their parents’ home, it is often unplanned and can create financial, emotional, and relationship strain. But…with a bit of creative planning, the recipient of the boomerang can help their young adult without sacrificing their financial future.

No matter the state of the economy in the United States, the share of young adults moving back home rose over the last several decades. It raises the question why. Some common reasons are:

  • Rising student loan debt (in 2012, 45% of 25 year old college graduates owed $20,000 or more.3)
  • Inability to find a job on graduation from college (or not going to college)
  • Cost of living independently
  • Delaying traditional milestones (e.g. getting a job, marrying, having children)

The Financial Story

What is challenging about the scenario of an adult child coming back to live with you is that it can be taxing emotionally, relationally and financially. Many financial plans are not created to “expect the unexpected”, so when a child boomerangs back…and with them comes increased living expenses for on average three years…it creates strain on the original financial plan.4 In order to address the financial needs of the situation, below are some common mistakes families make that put their long term financial plan in danger.

  • Reducing contributions to retirement savings if still working
  • Withdrawing from investment savings at too high of a rate
  • Not putting a limit on lifestyle spending during the time the adult child is back at home
  • Not communicating expectations with the adult child or asking them to contribute to the household in some way

So what do you do when your adult child announces their intended return to the nest? By being proactive (and a little creative), it is possible to ensure your financial future stays in tact through this transition while you support your family. Here are four important tips to set yourself up for success in a “boomerang” scenario.

  1. Set a “Boomerang Budget”

How much are you willing and able to commit to help your loved one. Every family situation is different, but setting guardrails is very helpful in managing expectations and setting your child (and relationship) up for success

  1. If at all possible, stick to the original plan

This will necessitate a call to your trusted financial advisor. Your greatest ally in an unexpected life event is an expert who can see the situation through a different set of eyes. Most likely, they will see strategies you can’t. If you are still working, don’t reduce retirement savings. Keep paying yourself first and instead, identify areas in the household where the boomeranger can contribute meaningfully. If you are retired, identify your ideal lifestyle and your “acceptable” lifestyle, as well as your willingness to put your ideal lifestyle on hold for a time.

  1. Set the Rules of Engagement

One of the biggest mistakes that can be made is to not address the obvious situation – your adult child is coming back home to live. With that transition comes many changes and opportunities to help your child emerge stronger at the end of their time back in your home. Here are some important issues to address and questions to ask your adult child before they come back to stay.

  • How long will they be staying?
  • What measure will you use to determine it’s time to leave the “nest” (certain amount in savings, level of debt outstanding, time in a job)?
  • How will they contribute to the household (there is no such thing as a free lunch)?
  • What are their personal & professional goals…and how can you help them get there?
  1. Stay Connected

Many parents struggle with what parenting looks like with adult children. The truth is you are more of a coach than a parent at that point in their lives. To be successful, it is critical to stay connected with your adult child. That success is measured by your intentional and focused communication with them. Set regular check-in’s and let them know that you are rooting for them and want to see them succeed when they launch out again. Cultivating your relationship in this way will pay numerous dividends. It manages expectations, builds trust between you, and empowers your child to succeed.

Having a member of the “Boomerang Generation” come to live with you shouldn’t be filled with financial fear or seen as a failure to launch for your child. If handled proactively, it’s filled with opportunity.

(1) Pew Research Center analysis of 1964, 1981, 1990, 2000, and 2016 Current Population Survey, Annual Social and Economic Supplements.
(2) Vespa, Jonathan, “The Changing Economics and Demographics of Young Adulthood: 1975-2016”, U.S. Census Bureau, April 2017.
 (3) Lewin, Tamar, “Some Parents, Shouldering Student Loans, Fall on Tough Times”, New York Times, 2012.
(4) Dettling, Lisa J. And Hsu, Joanne W., Federal Reserve Board, “Returning to the Nest: Debt and Parental Co-residence among Young Adults.”