In July, more than half of young adults between the ages of 18 and 29 were living with one or both parents, the highest percentage since the Great Depression, according to Pew Research Center. While some may fear for our generation’s financial independence, there are a lot of advantages to living rent-free with Mom and Dad.
I had just graduated from college in February and was planning to move to Washington, D.C., in March when the COVID-19 outbreak put those plans on hold. Moving back home certainly wasn’t part of my post-graduation plan, but I am deeply grateful for the time I was able to spend with my family and get my finances in order.
Ideally, living at home should provide a way to improve your financial well-being and lay the groundwork for future success. A common rule of thumb for budgeting is to spend no more than 30% of your after-tax income on housing, says Michaela McDonald, a certified financial planner based in New York City. Depending on what part of the country you live in, that can be a difficult standard to meet. But if you’re able to keep your job after you move in with your parents, you’ve freed up that money to put toward other goals, such as saving for retirement and paying off debt. And depending on whether you pay rent and other expenses to your parents, you might also save on utilities, Wi-Fi and cable. Many parents throw in three square meals for free.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Make a plan. All that passive saving is well and good, but it can also be unmotivating, so you should have concrete financial goals when you move back home. “Paying off debt is first and foremost in the order of operations when moving in with the family,” says Andrew Westlin, a certified financial planner based in Annapolis, Md. Start by taking a look at any high-interest-rate debt you may have, such as credit cards or personal loans (see Strategies to Tackle Debt). Use the money that would be going to other living expenses to pay those loans off as fast as possible. If you have student loans, make sure you’re at least making the minimum payments, Westlin says.
Don’t ignore retirement saving. If you’re working, and your employer matches 401(k) contributions, make sure you’re saving enough to get the full employer match. If you don’t have a 401(k), try to put at least something away in an IRA. If you can save just $100 a month in a retirement account, that money will grow substantially over the years. “It seems so far off, but your future self will definitely thank you,” McDonald says.
Next, start building an emergency fund. Generally, setting aside enough money to cover three to six months of expenses is a good way to establish a healthy safety net, Westlin says. That exercise can also help you set a time line: When you’ve reached your savings goal, that might be the signal that it’s time to fly the nest.
In my case, I didn’t have any debt that I needed to pay down, so I was able to begin building a financial safety net fairly quickly. I established a healthy emergency fund and started saving for retirement. After five months, I made the move to Washington, D.C. It was time to start a new chapter.
-
What the Comcast Cable Spinoff Means for InvestorsComcast has announced plans to spin off select cable networks and digital assets into a separate publicly traded company. Here's what you need to know.
-
TJX Stock: Wall Street Stays Bullish After EarningsTJX stock is trading lower Wednesday despite the TJ Maxx owner's beat-and-raise quarter, but analysts aren't worried. Here's why.
-
What Does Medicare Not Cover? Seven Things You Should KnowHealthy Living on a Budget Medicare Part A and Part B leave gaps in your healthcare coverage. But Medicare Advantage has problems, too.
-
When Renting Is Smarter Than Buyingreal estate There are some situations when renting is smarter than buying. You're not necessarily throwing your money away when you rent.
-
The 50-30-20 Budget Rule: A Simple Way to Save MoneySaving Using the 50-30-20 budget rule is an easy way to save. It helps you prioritize saving while paying off debt.
-
The Best Banks of 2024Making Your Money Last Kiplinger's list of the best banks, based on interest rates, fees and other features.
-
How Do You Pay off Credit Card Debt?Making Your Money Last Pay off credit card debt with these tried-and-true strategies.
-
Bear Market Strategy for Millennial InvestorsA focused, goal-oriented approach to investing can help millennials navigate a bear market.
-
Rent vs. Buy: Sometimes Renting is BetterPersonal finance experts have long held that homeownership is a key step to building lasting wealth. How does that hold up in a pricey real estate market?
-
Protect Your Retirement Income from InflationMaking Your Money Last Costs are rising, and the market is bearish, but that doesn’t have to jeopardize your long-term security.
