Surviving the “Move Back Home”

Fewer young adults are living independently these days.

According to a 2020 Pew Research survey, over 50% of young adults aged 18 to 34, or more than 26 million young adults nationwide, reported living with at least one parent or close relative. This sharp uptick in 2020 has surpassed the record 48% reached during the Great Depression.

Statistics show an increase across all ethnicities, geographic regions, and for both men and women, making it a national phenomenon.

Why the Increase?

The trend of young adults moving back home is not a recent one, as growth in new household formation has trailed the overall population growth for the last few years. Young adults are increasingly responding to financial challenges by moving in with roommates or family members until they feel financially established enough to strike out on their own.

However, the coronavirus pandemic has caused a surge in young adults returning home. Nearly 1 out of 10 said they either temporarily or permanently relocated due to the outbreak, with 23% citing closing college campuses and 18% responding that they had either lost their job or suffered financial hardship due to the pandemic. Among 16 to 24-year-olds, the percentage of those neither enrolled in school nor employed more than doubled from 11% in February to 28% in June, a sign that the exodus of young adults out of major metropolitan areas and into their parents’ home has shown little sign of slowing.¹

What kinds of financial challenges have spurred this reverse migration? Respondents of a 2014 Fannie Mae National Housing Survey indicated that a majority of adult children who are between 23 and 34 are living with their parents because they:

1. Do not earn enough money to confidently meet anticipated expenses
2. Are not married yet
3. Are saving money for the future

It’s likely that student debt has many young adults feeling overwhelmed. In fact, the 2020 graduate’s average student debt is $32,731.² Debt’s crushing weight can make independence—let alone saving and investing—seemingly impossible.

If you are a parent or young adult in this situation, here are some financial tips from Jemma Financial:

For Parents Providing Financial Support

Many parents need to make adjustments when adult children move back home. Whether it’s making room for them in the house or providing financial support, the move should be a short-term situation. The ultimate goal is to help them be independent. Consider setting a deadline for them to stay, such as when they pay off student loans or a few months after they find their first job. Since they are not guests in your home, it helps to be clear on your expectations about what you will pay for and how they will help around the house. In the meantime, encourage your adult child to create a solid financial base and develop a pattern of saving.

For Young Adults Moving Back Home

Often living at home is a good way to reduce living expenses, such as utilities, food and transportation. During this time, make a plan and prioritize expenses. Ideally, put a goal in writing to make something that seems in the distant future an actual reality.

To help meet your goals, figure out ways to maximize your savings. Brew coffee at home instead of heading to the coffee shop. Cook and eat more meals at home. Then take that extra cash and invest in an appropriate investment based on your goals, risk tolerance and time horizon. You can even have that extra cash directly deposited from your savings account to a separate investment or IRA retirement account. You may be surprised
how quickly it adds up!

^{1. Pew Research Center. 2. Forbes.com}