According to financial experts at Thrivent, a recent survey found that 41% of parents have adult kids at home.
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So, how can you financially prepare if you are in this situation?
First, create a written financial strategy and a budget. Then, outline what kind of financial support you are able to provide.
Experts say it's also critical to establish expectations around your financial support so that your child doesn't think this is an unlimited handout. Make a timeline of your support, and outline what expenses your kid will pay for.
Take this opportunity to reinforce overall good financial habits with your child, like a lesson on budgeting, paying credit debt and establishing an emergency savings fund. That can set the stage for long-term financial independence.
More tips form Thrivent:
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- If you don't have a financial strategy, now is the time to create one - According to a survey, 51% of parents don't have a financial plan, and 26% of parents within that group don't have plans to create one. It's difficult to determine the level of financial support you can provide if you don't have a baseline. Getting increased clarity in a few areas, like knowing your balances, cash flow and how much you're currently saving toward your short and long-term goals, is an important first step in creating a financial strategy.
- Review your financial picture to determine the level of financial support you can provide. It can be tempting to offer unlimited financial support to your boomerang child if you're concerned about them, but this could be to your serious disadvantage. Closely review your financial strategy, ideally with help from a financial advisor, to talk about what's changing and make adjustments accordingly. In particular, know where you stand with your short- and long-term goals and how they'll be affected if your child moves back in with you. It's important to minimize the potential financial impact on your own retirement plan as well as other savings, including for healthcare, as you offer support to your child.
- Establish clear expectations at the outset - and hold your adult children accountable. It's critical to establish expectations around your financial support so that your child doesn't think this is an unlimited free handout. Start with an honest and frank conversation about what they need and then put a plan into writing that covers: 1) a timeline for your support; 2) how your child should use your financial support; 3) expectations around paying for expenses and; 4) how they should demonstrate their progress.
- Help your boomerang child develop a healthy relationship with money. This is a great opportunity to instill and reinforce wise financial habits. If your child learns and practices good financial behaviors while living with you, it can set the stage for long-term financial independence. You can help them understand budgeting and cash flow, work with them to establish their short and long-term financial goals, build an emergency savings fund, and teach them about how to mindfully take on debt.
- Be a financial role model. Thrivent's survey found 75% of parents aren't discussing money management with their child, revealing a missed opportunity to help foster their financial growth. After all, what better way to teach your children about personal finances than by showing them how you manage your money? You can help your child think critically about future financial decisions and help them use money as a tool, not a goal, for achieving their most important goals.