Inside Money: When the graduate returns home

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Saddled with high student loan debt and an inability to find competitive jobs, moving back home is an attractive option for many graduates. (Thinkstock)
IN THE PAST FEW YEARS, you may have heard the statistic that 85 percent of college graduates return home to live with their parents.

That number was overblown and statistically flawed.

However, the reality isn’t much better.

A recent Gallup poll found 45 percent of adults between the ages of 18 and 23 live with their parents. Of this group, 28 percent are college graduates. This compares to 14 percent of the 24- to 34-year-old population who are college grads and living at home.

The boomerang is a reality for many families. Saddled with high student loan debt and an inability to find competitive jobs, moving back home is an attractive option for many graduates.

“Having experienced this situation from both sides — as the graduate returning home and then as the parent with a child returning home — it is something neither party, parent or child, expects,” says Jim McCarthy, a certified financial planner with Directional Wealth Management in Rockaway.

But long before you let Junior settle back into his old room, you need to set some ground rules.

START THE CONVERSATION

By the time your child is a college graduate, hopefully you’ve already had a lot of conversations about money management and budgeting.If you’re willing to let your student move home, start by saying he or she is welcome back, but that there is a time limit on the stay, says Marnie Aznar, a certified financial planner with Aznar Financial Advisors in Morris Plains.

“It is dangerous to have it be open-ended, because if it becomes too comfortable and easy, there becomes less incentive for the child to move out and on with their own independent lives,” Aznar says.

Be sure to discuss privacy, autonomy and responsibility. Also consider putting plans in writing.

TALK ABOUT MONEY

You’re trying to help your kid, not give him or her a free ride. That means you should ask for some financial contributions to the household.

“It is quite reasonable for parents to expect a college graduate to pay something toward their living expenses,” McCarthy says. “The amount is not as important as the discipline of paying a monthly housing/living cost.”

Exactly how much you ask for will depend on the graduate’s salary and if he or she is working at all.

If your child has found a job in a desirable field, that’s great. If your kid isn’t working yet, but is trying to find work, you can be more flexible.

Brian Kazanchy, a certified financial planner with RegentAtlantic Capital in Morristown, suggests parents consider these questions about their grads:

• How serious are they about getting a job or advancing their career?
• Why are they moving back home?
• Are they lazy?
• Are they trying to save money for a down payment on a home?
• Are they working close to home and it just makes more sense?
• Do they have a lot of student loan debt to pay off?

If your child, over the course of several months, can’t find his dream job, he should take any kind of job to bring in some income.

“Staying home and doing nothing is unlikely to bode well for family relations within the house,” Kazanchy says.

Aznar suggests you arrange for an automatic monthly transfer between bank accounts, so you don’t have to nag your child every month.

DON’T FORGET YOUR RETIREMENT

While you help your child, be sure that you don’t upset your own budget and retirement plans.

Having another adult in the home will increase costs, such as food and utilities, and those costs should be part of your negotiation.

“Having the child contribute toward the household expenses should mitigate most of the increased costs,” McCarthy says. “In extreme circumstances, everyone in the household will need to ‘tighten their belts’ and eliminate discretionary expenditures.”

Advisers agree that parents need to focus on their retirement planning, and to only consider stopping contributions as a last resort.

“If they fail to save enough, they may not have the option of working longer,” he says. “By providing resources to their children, they may create a shortfall that they are unable to recover from.”