Financial considerations for when your kids move back home

In times of transition, your children may have to move back home. Make sure you’re prepared to support them while still achieving your financial goals.

Do you have a little birdie returning to your previously empty nest? You’re not alone. This is the season of summer vacations and graduations, and many young adults are returning to live with their parents. But, in this hot housing market and rent in many major cities reaching a record high—your kids may be sticking around longer than anyone planned. 

Although it’s nice to have your kids at home, it can present challenges if you weren’t expecting it. So, whether you’re talking to your kids about moving back in with you—or they already have—it’s important to develop a financial strategy that can support your children while still keeping you on track with your investing and retirement goals.

Beth Toney, Senior Vice President, Premier Regional Director at Truist, answered some commonly asked questions about how to manage your finances if you find yourself going from empty nester to welcoming your kids back home.

Q: My kid is moving back home. What are some of the ways this might impact my finances?

A: A few things come to mind. A lot of it will depend on the cost of your family’s lifestyle. Some things might get more expensive and some things might get less expensive.

In terms of expenses that are likely to rise, the cost of food is certainly something to consider, whether it’s groceries or going out to eat. And utilities, keeping the lights on, running water, things of that nature. You might also have to consider an increase in spending on gas if you’re going to share a car with your child.

Also, think about how long you anticipate having your child back home. If you’ve gotten used to traveling more or spending money on discretionary items, you may have to reevaluate your budget to figure out your needs versus wants as your cost of living changes.

Q: What are some strategies I could use to potentially save money with my child back home?

Toney: My husband and I have some personal experience with this. In the spring of 2020, our daughter was a full-time college student and living in an apartment, and we were helping to support the cost of that. But when her school restarted in the fall virtually, she moved back in with us and that cost went away.

You should have a discussion with your young adult child about when you expect them to chip in. For example, when you go out to eat as a family, will your kid pay for their meal? Or if you’re buying groceries, do they share the cost of that? If you’re sharing a vehicle will they be pitching in for gas money? If they don’t have an income, consider putting a budget around how much gas you’re willing to put in the car for them to use.

Q: How can I plan ahead for my child being home?

Toney: Do whatever works for you in terms of making a budget. I’ve seen people use a budget worksheet. A lot of financial institutions have online banking tools that can help you track your spending.

You can also use the envelope system, where you put money into envelopes for different categories of spending. For example, when the money in your entertainment envelope is gone, you’re done spending on that for the month.

If it’s within your budget, you may also think about formally consulting with a Premier Banker. A lot of folks will say, “Oh, my neighbor’s friend told me this,” and that’s wonderful. But if you are thinking about your household finances, I think it’s important to get an unbiased opinion help you forecast what you can really afford.

Q: I’m worried that having my child back home might affect my retirement goals. What can I do?

Toney: This situation can certainly impact how much you are putting away in different savings vehicles. If you were putting away savings so you could retire at 65, but you’re now putting some of those savings toward child-related expenses, that might delay the age you can retire.

But there are certain things you can do to help minimize this disruption. If you have a 401(k) or other retirement accounts, continue your automatic contributions if you’re able to do so. You should also review your budget about twice a month to continue looking for ways to cut spending. Maybe you have cable and some streaming services, but you decide that you don’t need all of them. I think it’s really important to be aware of where your money is going and to look for ways to make changes to your spending.

Q: What about my higher-risk investments—like stocks?

Toney: I think the real key here is spending time with a premier advisor. If you’ve got money invested in the market through a broker or a bank or your own investing, it’s important to understand where the market is, where we may be headed, and whether you need to rebalance your portfolio. Ask questions like, “Do I need to be conservative during this time period?” or “Do I have additional savings I can continue to put into the market?”

This approach allows you to still take advantage of the swings in the market as they’re happening and continue to save.

Q: I wasn’t prepared for my child to move back in with me. How can I minimize the impact it has on my financial plan?

Toney: If recent years have taught us anything, it’s to be prepared for the unexpected. If this situation has been a bigger financial strain than you anticipated, you may have to consider strategically using the lines of credit you have available to you. This will help you get through transition period, and you can make a long-term plan for paying this off over time.

Q: How can I help my kids get out on their own?
Toney: Start by helping them to better understand budgeting and help give them the financial foundation they need to succeed. If it makes sense, set a timeline for them to get back out on their own and have them save up while they’re still at home.

You should also consider doing that for your own budget. As your child prepares to leave, think about how you can reprioritize your budget. It’s a matter of planning and understanding your budget and knowing where you want it to go.

Find out how our premier advisors can partner with you to keep your goals on track.