Nov. 9, 2020
If your adult kids are moving home right now, cut them a break. Nine times out of 10, they wouldn’t be doing it if they didn’t absolutely have to.
Rising housing costs, a pandemic, rampant job insecurity, high debt levels and a lack of savings among millennials are resulting in thousands returning to the nest to regroup.
For many reasons, I think short-term intergenerational living can be a beautiful thing. It’s a financial lifesaver for students and new grads who literally are up against one of the worst job markets in history. Aspiring young homeowners can finally save that down payment and capitalize on the low interest rates. Young parents who need to work but can’t afford child care or have health concerns with daycare can rely on grandparents to step into the role of nanny. For the hosts, it’s an opportunity to help out in a hugely meaningful way, and spend more time with your family.
But before you refurbish your basement into a live-in suite for your son, daughter-in-law, their two kids, a fish and a cat, consider these financial and relational factors.
Will you collect rent or give them a free ride?
Are your house guests collecting the Canada Recovery Benefit or Employment Insurance? Are they working full or part-time? Are they unemployed without a lick of savings? The best practice is to set a rent rate that is appropriate for the situation ... and yes, I’m recommending that you don’t let your adult kids off the hook completely.
Collecting rent establishes a healthy boundary where you don’t feel like you’re getting taken advantage of and your adult kids still have to exercise good financial judgment through budgeting, a critical life skill. Plus, you’ll naturally have increased utility bills, groceries and more that need to be paid for. If you’ve stepped back from working in order to care for grandkids, you’ll experience reduced income, too.
Even if you stash their rent off to the side in a savings account that you give back to them when they eventually leave, it’s still important to collect it.
The exception to this recommendation is perhaps if the duration of the stay is for a very short period of time. And, if they legit can’t pay a dime, figure out another way they can support you, such as cleaning the house, maintaining the lawn, walking the dog, cooking, painting, fixing the fence, doing the books if you have a home-based business and so on.
Collecting rent will hopefully prevent the situation where your unemployed daughter pulls into the driveway one day with a new, and unnecessary, Volkswagen Jetta that she’s now able to pay for because she’s amassed a pile of savings by living at home, rent-free.
How long will your family be with you? Who’s going to clean up after the baby throws his spaghetti on the wall? Will you be sharing one Netflix login and one Amazon Prime membership? When the dishes pile high, who’s loading the dishwasher? Will the grandparents care for the grandkids, and for how many hours a day? Is there an expectation that your kid is applying for jobs during the day? If your adult child works full-time, what’s their end game (saving a down payment or paying off debt)? Is it OK to do a HIIT workout in the living room? Which day are you going to collect rent? Does the internet package need an upgrade now that there are four adults working from home?
Clearing the details up front saves money, confusion and resentment down the road. It can be helpful to discuss this all together, and agree to the “house rules.”
Chronic mismanagement of money? Support their financial literacy.
Maybe this isn’t the first time you’re helping your kids, or it is? Either way, possibly the biggest gift you can give them is powerful financial skills where they learn how to get out — and stay out — of debt, build and stick to a budget, and save for a big-ticket item.
If they aren’t sure where to start, sit down and show them how to make a basic budget or help them tally up their assets and liabilities so they see the clear picture of where they stand financially. Talk to them about the power of automatic savings contributions. Hook them up with an informational meeting with your financial adviser.
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Honestly, straight-up freeloading is very rare. But if it’s happening to you, it’s up to you to stop it.
I don’t know how long pandemic economic repercussions will impact your adult kids. Certainly economists are hopeful that by mid-next year there will be more job security, but time will tell. My best advice is this: if your adult kids are moving home, why not embrace this period of time in your life? It can be financially and personally rewarding for everyone.