Renowned financial guru Suze Orman has sparked debate by saying that parents should ask for financial contributions from their adult children who still live at home.
Suze Orman’s Advice for Parents
Financial advice from a blog post that Suze Orman published last year has resurfaced, and its contents have created a bit of a stir.
Orman’s advice: if your adult children are still living at home with you, you should be charging them rent and requiring them to pitch in their share of the bills.
Young Adults Living at Home Longer
More and more millennials and adult Gen Zers are opting to stay in the family home into their twenties, usually citing economic concerns.
Cost of Living Makes Moving Out Harder
The cost of living independently is frankly out of reach for many young adults, and living at home longer gives them time to save money for a future home purchase.
Parents Struggle to Make Ends Meet Without Help
But since 18% of parents whose adult kids are living at home say that it’s causing them financial stress, Orman advises bridging the gap by having everyone in the home pay their fair share.
A Third of Young Adults Live At Home
Recent research says that of the millennials and Gen Z adults under age 34, one-third of them are living with family.
Orman says that parents need to be mindful of the fact that allowing their adult kids to “freeload” will only hurt everyone involved.
“Adults Don’t Freeload”
“Adults don’t freeload,” Orman wrote. “Your kid will always be your kid. But they are also now an adult. And you can help them make that transition by finding appropriate ways for them to start paying some of their way, assuming they are working.”
Orman Says Everyone Should Pitch In
The financial expert doesn’t advocate for gouging your children, but having them pay their share of the family cell phone bill or car insurance, and even pitching in a small amount for rent, can benefit the whole household.
The Many Benefits of Sharing Responsibility
Doing so takes some of the financial strain off of the parents, but also teaches an element of responsibility to the children, who will eventually need to live independently.
A Note for Uncomfortable Parents
Orman says if the idea of charging your children rent makes you uneasy, you can consider setting that aside to return to them later as a savings nest egg.
Kids Need to Learn Financial Responsibility, Orman Says
But she advises pushing past the discomfort and encouraging financial contributions because it is “important learning to master before your kid moves out and is responsible for managing their own household finances.”
Most Young Adults At Home Contribute Financially
72% of the millennials and Gen Z adults who live at home do contribute to the family’s finances, either by chipping in for bills or paying a portion of the house payment.
Research shows that the vast majority of young adults living with parents are not doing so for free.
The Effects of Freeloading
But for those who are “freeloading,” as Orman puts it, there is a price to pay. In addition to the impact on parents’ financial security and their own future, footing the bill for their children into adulthood could mean that they can’t sustain their own retirement.
Negative Impacts on the Future
This could mean that the kids would eventually have to support their parents financially.
And that may prove difficult because Orman warns that not making your kids contribute sets them up for financial irresponsibility later on in life.
The Way Forward
Orman’s advice suggested that teaching important lessons about financial accountability now would pay off eventually.
The Lesson Learned From Being “Held Responsible”
“When you are held responsible for certain expenses when you are living at home, it forces you to be more careful about your spending, so you have the money each month to cover your expected costs,” she wrote.
“How Is That Not a Loving Lesson?”
“How is that not a loving lesson?” she continued. “You can teach your adult kid the lessons right now that will help them avoid financial trouble when they launch into their own households.”
Retirement Prospects Bleak for Many
Setting young adults up for success is only part of the reason Orman wants parents to encourage splitting costs.
Last year’s Social Security and Medicare Trustees reports revealed alarming news: Social Security funds are dwindling.
Social Security Funds Running Out
Workers who retire after 2034 may see smaller Social Security payments, making it even harder to keep up with the cost of living without income from a job.
And Orman says some parents are even dipping into their 401k funds to cover their adult children’s living expenses.
Living Together Should Be Mutually Beneficial
The bottom line is that while there’s nothing wrong with families cohabitating for longer, it should be to everyone’s benefit, and parents shouldn’t suffer financially while their working adult kids live at home for free.
Communication is Key
The best solution for everyone is to have clear communication about financial expectations and stick to them. This way, there are no surprises or hurt feelings at the dinner table.
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The post Rent-Free Living: Adult Children Draining Parents’ Savings – Time for Contributions? first appeared on From Frugal to Free.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
