Gauging the boomerang effect

On the one hand, the sharing of family finances has benefitted some young adults, as it affords them the opportunity to get back on their feet and save for the future. In fact, 78 percent of Boomerang Millennials are satisfied with their living arrangements and upbeat about their future finances. The baby boomer generation, however, may have thought that after the kids went to college, they would be able to save as empty nesters. Instead, the adult children have come home to roost and may be posing a financial hardship.

Since it may be tempting for Mom and Dad to revert to parenting mode and offer support, regardless of the age of the kids, parents need to put their foot down and make sure they are paying themselves first before agreeing to such an arrangement. The first step parents should make is to check with their financial advisor and ensure their retirement strategy is able to withstand ebbs and flows during life transitions, including having a boomerang family.

An adult child at home means increased monthly expenses including everything from food bills to utilities like electricity, extra money that could have been going towards retirement. A survey by VibrantNation found that 56 percent of boomer women say they spend more than $5,000 annually on expenses for adult children (many of whom are living at home) and 17 percent spend more than $10,000 annually.

Not saving enough money for retirement is a mistake that the majority of households make, a problem only exacerbated by a Boomerang situation. Parents should pay their retirement accounts first and think twice about where the household budget is going. For adult children living at home, a percentage of their income should go towards helping with household bills, whether it is paying a portion of the cable bill or taking up chores that would often fall on the parents’ shoulders. It is important to outline a budget so boomer parents do not get stuck in a situation where they are taking the brunt of the bills while their adult children are overspending their paychecks.

There are both pros and cons to Boomerang families, yet it is the responsibility of the parents to make sure lending additional support will not hurt their bottom line and affect their retirement. While the parents who had an adult child move back home in the survey by Pew Research had the same level of satisfaction with their family life and housing situation as parents with adult children who had not moved home, satisfaction does not equal money for retirement.