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Build a healthy financial relationship with your boomerang child

The ongoing pandemic has accelerated an already-growing trend: Young adults are moving home and accepting financial assistance from their parents at the highest rate since the Great Depression.

During the peak of the pandemic, an analysis by Pew Research Center found 52% of young adults, also known as “boomerang kids,” moved in with their parents. Today, according to a 2022 Thrivent Boomerang Kids Survey,1 40% of parents report having an adult child who is currently living with them. 26% had an adult child who was temporarily living with them but then moved back out. The survey was conducted in partnership with data intelligence company Morning Consult and polled approximately 500 parents and 700 adult children between April 30 – May 3.

Economic conditions, coupled with the current graduation season, are contributing to the trend of young adults boomeranging back to their parents’ homes. In fact, when asked why their child moved back in with them, the parents surveyed said it is due to increasing rent/home prices (33%), needing additional financial support following graduation from college or high school (26%) and job loss (17%). Of the adult children surveyed who reported moving back in with their parents, 33% say the reason is because they are not financially independent and cannot live on their own yet and 28% are trying to save money for a home purchase.

If your adult child returns to your once-empty nest, are you financially prepared?

Boone Jackson, a Thrivent financial consultant located in St. Louis, Missouri, endorses a thoughtful approach to supporting adult children: "You've already invested heavily in their development, but they may need a little more help to stand on their own for the long term—and that's fine."

Parents have an opportunity to instill wise financial habits ahead of their children moving back in with them but aren’t always taking advantage of it. The Thrivent Survey found that 70% of parents aren’t discussing money management or setting financial expectations with their adult children.

"It's important to have a mutually agreed-up plan," Jackson adds. "Instead of enabling them with a free ride, you can instead be an advocate and a mentor by teaching them how to foster their own financial growth. For example, you can help with research on getting loans, instead of taking out the loan on their behalf."

Being unable to afford rising rent/home prices is the main driver that caused an adult child to move back in with their parents.
2022 Thrivent Boomerang Kids Survey

Figure out how much you're willing & able to help your child

Before considering a move-in, take a frank look at your current financial status. Many parents reacting out of love and concern for their kids do not consider their own finances first, to their serious disadvantage. In fact, the Thrivent survey reveals that 35% of parents with adult children living at home have compromised their own savings for long-term goals, like retirement or housing, in order to help their children financially. 26% of parents also note the inability to pay off debt or save for short-term goals, like vacations, due to supporting an adult child living at home.

When you review the hard numbers, do your best to avoid a potentially financially perilous situation. "When I work with couples saving for retirement who are also helping out their children, I remind them that their kids can always borrow to stay afloat, but they can't borrow for retirement," says Jackson.

"And you know what? Your kids might actually benefit from a little bit of a financial burden as they're starting life, to reign in their spending," he says.

Ask yourself these questions to determine if you can fulfill your child's request for financial help:

What's the potential risk of helping out my adult child?

Look back at your child's relationship with money. You don't want to penalize them if they haven't always had the greatest money management habits, but you do want to minimize any potential financial fallout that could jeopardize your retirement plan as well as other savings, and your day-to-day standard of living.

You also don’t want your child to overestimate your ability to financially support them. The Thrivent survey found of the young adults who already live at home, 72% say they think their parents are financially equipped to support them. But this doesn’t line up with what parents are prepared to take on. Only 21% of parents said they could provide full financial support to their adult child if they had to move back in with them.

What's my target retirement date?

This is a critical milestone on your timeline, with or without a boomerang boarder to consider. Once you know when you'll start living on a fixed income, it's easier to know what you can offer and for how long. Jackson also suggests staying on track with your long-term plans: "It doesn't make sense to let your child's financial circumstances become enough of a burden to postpone your retirement."

Should I ask my child for repayment once they're back on their feet?

If you're concerned about your financial future but still want to help your child, see if they would consider repaying some or all of your assistance later on, when you may need the financial lift. Think of it as a return on your investment in your favorite startup business.

Should we work with a financial advisor on our financial plan?

Engage with a skilled and objective financial advisor—one who's helped other parents make the same financial decisions. "Having a mediator is a great idea." says Jackson. "And I'm a big advocate of fee-based financial planning.2 Clients who come to us for debt management and join our fee-based program are generally more committed to reaching the goals they set, since they're paying to have personal accountability."

The Thrivent Survey found that having a financial strategy can make a difference in the extent adults are able to financially support their children if they move back in. Of those with a financial strategy in place, (75%) are more likely to be able to provide financial support to their child compared to 45% of adults who don’t have one.

70% of parents are not discussing money management or setting financial expectations with their adult children.
2022 Thrivent Boomerang Kids Survey

Foster your boomerang child's financial independence

Once you've surveyed your own finances, it's time to delve a bit into your child's financial profile, their budget if they have one, and their plan for becoming autonomous. Doing this ensures that you can look forward to reclaiming your empty nest and the lifestyle that goes with it.

Follow these three steps to develop a smart living-at-home strategy:

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1. Work with your child on their personal budget.

  • Ask to see your adult child's budget, if they have one. Work together on a realistic set of numbers, as needed.
  • Be realistic and reasonable. Don't penalize them for seeking your help or nag them about every dollar they spend.
  • Start by listing "non-negotiable needs." This can include things such as rent, car payments, student loans and other essential expenses. "Parents can help their son or daughter identify their basic needs, then work with them on ways to fund them," says Jackson.
  • Identify their "wants." These may include shorter-term goals such as "I want to buy a house."
  • Consider their wishes, or long-term goals, and a plan to fund them over time. Instead of just wanting "a house," they may say "I want a house like mom and dad's house now." In many cases, people put these wishes first, mistaking them for needs—which brings on debt."

Most important, remember that you can help your child make a plan, but it's up to them ultimately to make it work.

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2. Determine your child's household budget contribution.

"The child moving back home must realize that it's not a handout situation," says Jackson. Having something written and signed that addresses shared expenses and their short-term plans helps the child realize this is something real. You then need to decide what they will pay wholly and/or contribute to. It calls for some back and forth negotiation." Be sure to answer these questions:

  • How can I calculate their rent? For example, you might charge the same amount as a local studio apartment rental or reduce that amount in exchange for work on household tasks or projects.(Interesting fact: Only 35% of adult children pay rent.)
  • Which expenses should we share? Decide what portion of utilities, housekeeping and maintenance they'll pay, or have them assume specific expenses entirely (e.g., their groceries and utilities). Three quarters of boomerang kids contribute to household expenses.
  • Should I save a portion of their contributions? Then you can give them a "rebate" upon successful completion of their plan.

Surprisingly, parents and children may be more aligned than they think when it comes to paying living expenses. In fact, the Thrivent Survey found more children than parents have an expectation of what they should contribute to the household:

  • Groceries – 71% of adult children expect to pay, while just 47% of adults expect children to pay.
  • Partial rent or mortgage expenses – 49% of adult children expect to pay vs. 28% of adults expecting their children to help with these expenses.
  • Cable –38% of adult children expect to pay, but only 27% of adults expecting their adult children to chip in.
  • Utilities – 34% of adult children expect to pay, and 21% of adults expect their children to help.
    72% of adult children believe their parents are financially equipped to support them, yet only 21% of parents said they could provide full financial support if their child moved back in.
    2022 Thrivent Boomerang Kids Survey
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    3. Don't let your child neglect their own retirement savings.

    While your child is working on the goal of financial independence, it's still important that they remember to fund their future, and take advantage of compound interest on savings. "If they're already employed, tools like the 401(k) and the company match are valuable, no matter how much or little they can afford right now," says Jackson.

    "I keep hearing young adults say they'll start their retirement plans at 30," he adds. "But I remind them that if you start at 24 with $50 a month, you'll get further faster. The gains made by reinvesting proceeds and compounding can be greater than a young investor may imagine."

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    4. Encourage your child to set goals.

    • Ask your child to set a goal or goals for the near and short term. If they're unemployed, make it a point to discuss their ongoing job-search plan.
    • Decide an end date for your living arrangement.

    Most of all, remain open-minded. Learn the importance of being flexible and reacting to changing financial conditions.

    When you put some serious thought into how to structure your living experience with your adult son or daughter, you can not only avoid conflicts, but actually grow your relationship with them.

    "America is one of the only cultures that frowns upon multiple generations living together," says Jackson. "But there can be some great positive benefits to it. In the best situation between parents and adult children living together, their bonds can strengthen, and they can help each other. It's pretty cool to see."

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    Next steps

    To learn more about how to create a strategy for supporting a positive financial relationship with your adult children, connect with your financial advisor.

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    1 Results are based on a Morning Consult survey conducted between April 30th and May 3rd, 2022. The survey was completed by 2200 adults from a nationally-representative US sample. Screener questions were used to isolate the feedback of (a) 443 parents aged 40 to 65 with children aged 18 to 35, and (b) 677 adult children aged 18 to 35. The surveys were conducted online in English, and the data were weighted to approximate a representative US audience based on age, race/ethnicity, gender, educational attainment, and region. Results have an approximate margin of error of plus or minus 5 percentage points.

    2 Refer to the Thrivent Investment Management Inc. Form CRS Relationship Summary for more information about us; our relationships and services; fees, costs, conflicts, and standard of conduct; disciplinary history; and additional information. Available upon request from your financial professional and on thrivent.com/disclosures.
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