When adult children move back home

5 tips to avoid intergenerational conflict - and protect your retirement plan

Whether it’s due to the pandemic, job loss, rising housing costs or other factors, more and more adult children are moving back home to save money and find their financial footing. Last year alone, about 1.5 million Canadians indicated they had moved back home with their parents due to the COVID-19 crisis, with another 600,000 saying that they are ‘considering’ moving back home. 

While adjusting to adult children in your household can be challenging, it can also be a valuable opportunity to have important discussions about financial planning and budgeting – and instill solid financial habits to help your kids thrive. As Dr. Meg Jay, clinical psychologist shares in her book “The Defining Decade: Why your Twenties Matter – And how to Make the Most of Them Now”, your child’s early adult years are critical to their development for future success. Your guidance at this stage in their lives can help set them on a path towards a lifetime of financial success.

Here are a few more tips to help make your new living arrangement less stressful. 

1. Keep the lines of communication open

Start off on the right foot by clarifying your expectations from the beginning. Do you expect your child to contribute to living expenses and groceries? Do regular household chores? Be actively searching for a job if they are currently unemployed? Listening to each other openly and respectfully will save confusion and ensure both sides are represented and understood. If you have more than one child, consider communicating with the rest of the family to ensure there is no resentment as well.

2. Mutually agreed upon room and board

Decide up front whether your adult child will pay rent or contribute financially in some other way to household expenses. Charging rent is a good way to help offset added household costs and ensure your adult child doesn’t get too comfortable living at home. If the goal is to help your child get back on better financial footing, you can charge a low rent to start and then slowly build up. Or you can choose to put rent proceeds into a savings account that you will transfer to your child when he or she moves out. Either way, charging rent or asking your child to contribute regularly to household expenses is a good way to teach financial responsibility.

3. Clarify expectations and set limits

Your child may have moved home for financial reasons, but this living arrangement should be temporary. Be sure to establish an end date, particularly if you have agreed to provide your child with a financial break for a short time, if you are close to retirement or if you plan to downsize soon. Likewise, you should not be taking on additional debt (yours or your child’s) during this critical phase of your life.

4. Use this opportunity to teach financial independence

Talking about money can be awkward, but this living arrangement may provide the perfect opportunity to help your adult child create and maintain solid financial habits. Encourage him or her to build credit, create an emergency fund, stick to a realistic budget and set aside money for investing. If you have a budget, you may want to show it to your child to share ideas and demonstrate that you are also following the same principles. This is also a good time to think about how you are supporting your children. If you’re continually bailing them out when they run into financial trouble, you may not be teaching them fiscal responsibility or how to avoid getting into those situations to begin with.

Talking about money can be awkward. If you’re finding the conversation challenging, consider reaching out to your investment advisor to act as a resource and a buffer, or even help you facilitate a discussion in person.

5. Don't lose sight of your financial goals

You may also be supporting your child financially in some way – helping them save up for a down payment or pay off debt for example. While your wealth may provide both the opportunity and the satisfaction of helping your children, these financial gifts should not come at the cost of your retirement savings. Be aware that your circumstances could change suddenly and drastically due to life events like illness, incapacity or death of a spouse – ensure you’re prepared for different scenarios so your financial plan is not at risk. Consider meeting with your investment advisor to calculate how assisting your child may affect your short-term goals such as an emergency fund, or long-term goals like retirement.

It's a wonderful feeling to be in a position to help your adult children regain or build a secure financial footing but be sure to keep your financial wellness a priority.



If you need advice on preserving your retirement plan while supporting adult children, speak to a Richardson Wealth Investment Advisor.