Countless news stories over the past few years have covered how so many 20- and 30-somethings moved back in with their parents, even after graduating college. With a recovering economy, tough job market, and rising cost of living, many young adults didn’t have much of a choice. And while living with Mom and Dad may not have been their first choice, it was the financially sound choice. According to a report from the Pew Research Center, 32% of adults ages 18 to 34 say they live with their parents, which exceeds any other living arrangement (married or cohabiting come in a close second at 31%).
This isn’t exactly an unfamiliar arrangement for parents. But what happens when the roles are reversed? How would your financial picture change if a parent moved in with you? Here’s one man’s experience, with tips on how to make it work for anyone.
Lesson #1: Don’t forget your own finances when helping family in need
“I’ve found in life that the more I help others in need, the more it comes back to me,” says John Rampton, founder and CEO of Due.com, an online payment service. Rampton certainly walked the walk when his parents got divorced and his mother needed a place to live. The divorce left both his parents with little money, Rampton explains. His mom came to live with him — and his four roommates — for about a year before he secured his own home in Palo Alto, CA. When Rampton moved, his mom moved too.
He believed helping his family was the right thing to do, but it did put a strain on his own financial life. “In the beginning, I was paying for everything,” he says. That meant groceries, rent, utilities, and so on. After six months of living together, Rampton started asking his mother to chip in on the food and resources she used at home. He never charged her rent, hoping the extra space in her own budget would allow her to save for a place of her own.
Lesson #2: Lay some ground rules before parents move in
Rampton managed to cover the costs of having his mom move in, thanks to a good job and a savings habit he started years before. But handling all the expenses solo — and failing to set financial boundaries upfront — did put a strain on their relationship, he says. His relationship with other family members and even friends suffered too, because he was always frustrated. “My mom would eat our food, but sit and do nothing in the house,” he says. “It was a real downer and a time in my life I don’t like to look back on.”
But Rampton was wise enough to make a change before his relationship with his mom — and his own finances — was put into further jeopardy. “First, I made her get a job,” says Rampton, who believed his mom needed to get out of the house and take control of her life. He also encouraged his mom to exercise and engage with activities throughout the day. He suggested daily walks to get her moving and energized. “This helped her be more healthy, lose weight, and get outdoors,” he says.
Looking back, Rampton advises that anyone who invites their parents to move in with them should set boundaries ahead of time. Share your expectations and work with your family members to create a solution that works for everyone to avoid feelings of resentment, blame, or anger.
Lesson #3: Help with advice, not just cash
Sometimes the best help you can provide is to set up your parent with a professional. “It took me taking over my mom’s money for her to start to get out of this situation,” Rampton says. He notes that for his mom, dealing with money was tough because she was going through a time of trauma and upheaval.
“If you are in this same situation, seek help from trusted and experienced people who are better at finances than you are,” he advises. This may be you if you’re comfortable helping your parents better manage their money. But financial professionals, like fee-only financial advisers from the XY Planning Network and NAPFA, are good options. Members of each group work as fiduciaries, meaning they are legally obligated to work in their client’s best interest and to put those interests ahead of all else (including their own). Members of XY Planning Network are unique in that they charge a flat monthly fee for financial planning, which could be an affordable option for parents struggling to get back on their own feet.
Lesson #4: How to prepare if a parent moves in with you
Rampton’s help and support allowed his mother to save money and get through a tough period in her life. She just signed a lease to move into her own place, and both are very happy about her accomplishment. “It doesn’t happen overnight,” says Rampton, “and it was very frustrating until we looked at her finances together, made a budget, and put together a plan.”
If a parent (or parents) moves in with you, Rampton suggests preparing for the long term. He also advises going into the arrangement with the mindset that money “lent” to your family is actually money “given.” “I have ‘loaned’ almost $60,000 to my mother over the past four or five years,” he says. “This money I will never see.”
From their experience, Rampton and his wife now have a set limit on the amount of money they will ever lend family members. “We stay true to our rules and limits,” he says, and they don’t make exceptions. He also notes that while it’s hard to help family, he wants to when he can. Part of what enables him to feel comfortable doing so is maintaining an emergency fund, and he encourages others to do the same.
