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Digital natives have a lot in common with the millennials of the 19th century—both generations are marked by job hopping, older marriages, and uncertain economic times.
Now there’s another way today’s millennials are like those young adults (ages 18 to 34) from more than a century ago: They are moving back in with their parents.
Young adults are living at home with their parents at a rate similar to the 1880s, according to new research released by the Pew Foundation.
Overall, 32% of young adults live at home today. The percentage is even higher at 36% for young adults without a college education, according to the report. For those who are college-educated, the number drops to 19%. Earnest’s own data shows similar findings, with 19% of people in the same age group reporting that they live with their parents.
Conquer your student debt. Refinance now.
Why Is This Happening?
Demographics play a role–people are marrying and having children later, making them less likely to leave the nest. The Pew Research showed that only 27% of those without a college degree were married or living with a partner while 46% of college-educated young adults are married or living with a partner.
Student loan debt is also partly responsible for the growth in young adults living at home, according to a recent Federal Reserve study.
Housing is another stumbling block. While homeownership might be a possibility for young adults who work in second-tier cities, getting a down payment together may take years for the largest metros. Rent can also be a challenge, though not impossible with roommates. In New York and San Francisco, the average rent for a one-bedroom apartment was more than $3,000 in early 2016.
So if moving back home is increasingly the norm—at least for a short period of time—how do young adults and parents do it?
Renting With the ‘Rents
Nancy Roberts’ 24-year-old son returned to the nest last year.¹ Matthew had graduated from an East Coast college and landed a finance job in New York City. He lived at home for about a year in New Jersey before renting an apartment with two roommates.
Two years later, after visiting a friend in California, Matthew decided he wanted to try a warmer, laid-back lifestyle. So he moved home to save money and began actively pursuing a job on the West Coast.
His parents didn’t charge rent. “Instead, I said, ‘It’s your job to save enough to make this choice,’” Nancy recalls. But rent was only one expense; there was also that tricky area to navigate around food, drink, and transportation.
“My issue was him eating me out of house and home without replacing the food or even telling me,” she says. “If I have a couple bottles of wine, they are there for friends coming over. He also thought he had access to my car whenever he wanted, and he’d return the car with no gas.”
While this story may not represent every situation, it underscores some of the conversations that should probably happen when young adults move back in with parents.
Making a Cohabitation Plan
Living together as a group of adults—rather than as a teenager with parents—means both groups have to get real about money and expectations. Rent, transportation, food shopping, cooking, cleaning, and laundry are all topics that should probably get addressed as ‘part of the deal.’ Here are a few more areas where you can support each other’s expectations.
1. Searching for a Job
Parents can help young adults looking for work set goals around how many hours a day she or he will spend on the job search. They can also help by making an introduction to people in their network who can help with informational interviews. A recent Earnest survey showed personal connections are the best way to find a job where you’re happy.
Recent graduates who are looking for work might want to get busy. The Earnest survey also showed that people are happiest when their job search is shorter. There are also job programs like Koru designed for first-time job seekers that can help make introductions to companies and identify your strengths.
2. Building Credit and Good Saving Habits
Parents are key in helping to build a credit score by getting a secured credit card or become a cosigner on a credit card for their children. One of the keys to improving credit is making one-time payments—this is a major factor considered in a credit score.
In the latter case, the cosigner should still have complete access to the account since payment is legally their obligation and a late payment will hurt both people’s credit.
Along with building a credit score from an early age, it’s also important to start saving for retirement even with student loans. A Roth IRA is a great tool for early savers since it’s available without an employer sponsor. Even $25 a month will add up over time, but more importantly, create a savings habit.
3. Dealing With Student Loans
Did the parents function as a cosigner on private student loans? Typically, cosigner release is available after a certain amount of on-time payments. For new graduates, it’s important to make all student loan payments on time—a solid track record of repayment will also help build a good credit score as well as help work toward cosigner release.
If parents took out their own student loans, Parent PLUS loan refinancing can lower rates on these expensive federal loans; these can be refinanced once a graduate is within six months of graduation.
Almost a year after moving in with his parents, Matthew Roberts was offered his dream job in New York City, abandoned his California plans, and headed back to an apartment in Manhattan with a roommate.
“It wasn’t a bad thing to have him be responsible for rent and food and clothing again,” Nancy Roberts says. “We get together for brunch in the city. He’s happy to see me now and I’m happy to see him.”
¹She asked not to use her real name for privacy.