How to Handle Finances When Adult Children Move Back Home

Dad and Son

On the road to a comfortable retirement, you're going to experience a few bumps — and maybe even a detour or two. One obstacle that can hinder your retirement plans is the need to financially support your adult children. A recent survey found that 50% of respondents have sacrificed or are sacrificing their own retirement to financially assist their grown kids. The level of assistance can vary from paying their bills a few times a year to letting them move back home.

If your adult child is having money struggles and planning to return home, use these tips to make sure your willingness to help doesn't jeopardize your ability to reach your financial destination as scheduled.

Start a countdown timer.

Adult children moving back home is more common than you might think. A Pew Research Center study found that for the first time since the Great Depression, more than half of younger adults (ages 18 to 29) in the U.S. are living with one or both of their parents. The economic realities created by the pandemic last year take much of the credit for the rise in young adults moving back home. While no one knows when the pandemic will end, you should define timelines and set limits on the help you're able to provide without endangering your financial future. 

Establish financial boundaries.

In addition to setting firm time limits, establishing financial boundaries shields your retirement savings. Supporting your adult child can come in many forms. It can mean making auto or student loan payments on their behalf, paying for cell phone service so they can communicate with potential employers, or allowing them to live rent-free. 

Helping them financially with their bills should only occur after they've worked directly with their creditors to reduce or pause their payments. For example, if your adult child is having difficulty paying their credit card bills, they should enroll in hardship repayment programs offered by these companies. Expecting you to pay these bills is unreasonable and unnecessary if payment alternatives already exist. 

Require your adult child to present you with a budget before you commit to helping them pay any of their bills. This can help spur honest conversation about financial assistance limitations, given your retirement plans. It will also ensure you're not paying for luxuries like gym memberships or non-essential subscription services.

Set house rules.

Your adult child is all grown up, but it's your home they're returning to, and house rules should be set to make living together easier. Allowing your child to move back home for a temporary period without setting house rules can lead to arguments over privacy and money — or worse yet, give them no incentive to move out when they can financially do so. 

Set a curfew, place limits on the number of guests allowed, require that they be actively seeking employment, and make them responsible for household chores. This might sound like overkill, but having to adhere to house rules can give your adult child the motivation to get back out on their own as soon as possible.

Before your adult child unpacks their first box, mark both of your calendars with a move-out date. If helping them through a rough financial time is affecting your retirement goals, consider speaking with your financial advisor.