It is more common than
ever for adult children to live with their parents, with estimates of 15 to 25
percent of 20 to 34-year-olds currently living at home. Plus, even more than
that receive at least some financial support from their parents on a regular basis.
However, having a child at home can put a significant strain on your finances,
and sometimes even force you to delay retirement. If you are ready to get your
child out on his or her own, go through a few steps to help your child get
ready to be truly financially independent.
Educate
your child about expenses
One of the first issues
is that many adult children don't even realize what sorts of things they will
need to be spending money on when they are heading up their own households.
These are things that you cover and they just take for granted without
realizing. If you are comfortable with it, share your household expense sheet
with your son or daughter to help open their eyes to where money goes. Some
expenses to make sure you discuss include:
- Rent payments
- Utilities (electric, gas, water, cable, phone)
- Insurance (health, car, renters)
- Groceries and personal care items
- Dining out and entertainment
- Travel (going to weddings, visiting family, taking a
vacation)
- Transportation (car payment, gas and maintenance, or
public transportation)
- Debt (student loans, credit cards)
- Furnishing a home (furniture, décor, household items)
Prepare
a realistic budget
Your child will not be
able to move out for good until he or she has a balanced budget where the monthly
expenses are less than the monthly after-tax income. Otherwise, you will
probably be getting quite a few phone calls or texts requesting money to make
ends meet, or a panicked moment a year down the road when the credit card is
finally maxed out. You can help prepare your child by creating a detailed and
balanced budget.
This step will involve
some research into what actual costs are in the area where your child plans to
live and at the standard of living your child envisions maintaining. The tricky
part is that often, the standard of living your child wants cannot be supported
by his or her income. You will need to help guide your child to make the tough
decisions about where to cut costs to create a balanced budget. Look to have
them live with a roommate to minimize rent and utility costs; choose a used car
instead of a new one; or dine at home more to reduce the cost of food and
beverages from restaurants and bars.
Develop
a transition plan
Even if your child has a
budget ready, there's still the hurdle of actually going through with the move.
Parents have found that each of the following strategies can help the
transition happen more smoothly.
- Set a date for the move to give your child a sense of
urgency and responsibility.
- Share professional contacts if they may be able to help
your child find a better job that will enhance their income and ability to
cover expenses.
- Have your child start paying you "rent" every month.
Put the money into a savings account that they can later use as the
security deposit and first month's rent on their place.
- Go apartment shopping with your child to help find a
place within his or her budget. If the application is not going through
due to lack of credit history, consider co-signing the lease for the first
year.
