Living at Home? It’s a Smart Way to Chart a Financial Future
If you are a young Millennial living at home with your parents, you’re not alone. According to Pew Research, people 18 to 34 years old who are living with one or both parents is now the most common living arrangement for this age group – 32 percent of Millennials are doing it. This is a higher percentage than Millennials living alone, with roommates or setting up house with a spouse or partner. Pew points out that this percentage of young Americans living with parents is the highest in more than a century.
Why do Millennials live with their parents? A variety of factors may influence young adults’ decisions to live at home, says Pew, including the parents’ willingness to have them move back, lack of success in the labor market, the expense of independent living, debt obligations (especially student loans) and saving for future life plans.
Consequently, Pew data show that Millennials are putting off some key life milestones – marriage, parenthood, home ownership – as they work toward economic security and to fulfill their dreams.
Burden of Student Debt
The biggest monetary concern for college-educated Millennials is their student loan debt. Student Loan Hero reports that college students and graduates owe more than $1.4 trillion in student debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt.
In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year, and current default rate is 11.2 percent.
Living at home during college does have its advantages. Better Money Habits Millennial Report, conducted for Bank of America/USA Today, points out that Millennials who lived at home during and after college carry considerably less student loan debt ($8,100) than those who lived on their own ($17,700).
High Cost of Housing
The high cost of housing, especially in major urban areas, is keeping Millennials at home. Indeed, looked at geographically, just 14.1 percent live at home in North Dakota compared to 46 percent in New Jersey, according to a Business Insider article by Andy Kiersz, Here’s How Many Millennials Live with their Parents in Each US State. In Orange County, California, home to numerous universities large and small, the median home price is $695,000 and monthly apartment rent is about $1,900 for a two-bedroom unit.
Benefits of Family Help
The popular view that parents groan when their adult children move back home and immediately begin scheming to get them out again could not be further from the truth, according to the 2013 Clark University Poll of Emerging Adults, based on a national survey of 18- to 29-year-olds. Of the parents who have an “emerging adult child” (i.e., Millennial) living with them, 61 percent describe their feelings about it as “mostly positive” and only six percent describe the experience as “mostly negative,” according to the study.
When emerging adults live at home, parents’ lives may be disrupted in various ways, but they are more likely to see benefits than burdens, the study notes. “The three top consequences that parents have observed from having their grown kids at home are all positive, with 67 percent of parents saying they feel closer to their child emotionally, 66 percent saying they have more companionship with their child and 62 percent noting that their emerging adult helps with household responsibilities.”
Jeffrey Jensen Arnett, a research professor at Clark University and director of the Clark University Poll, told the Huffington Post, “I think it’s a great thing overall that there’s this wonderful closeness between parents and emerging adults today, and I really think it’s unprecedented in human history.”
Achieving Financial Security
Based on parents’ willingness to help their children, it’s quite within the realm of possibility that mom and dad will keep the home light burning for Millennials who want to save more before they strike out on their own.
“For a Millennial facing a tough economy and not much societal pressure to pair off or have children, saving money by living with mom and dad makes a lot of sense,” writes Huffington Post’s Shane Ferro in her article More Millennials Living At Home Reflects How America Has Changed. “It will help them pay down their debt and be ready to contribute to the economy a decade from now.”
According to an online report on CNBC, Here’s What Millennials are Prioritizing Instead of Retirement, written by Esther Bloom, Millennials are serious about savings, but for different reasons than their parents, and certainly their grandparents. “In defiance of conventional wisdom, young people are outperforming everyone in saving,” states Bloom.
As they look to the future, Millennials are indeed exploring uncharted territory as the first generation to plan for financial freedom during the whole course of their lives, according to a study released in May 2017 by Merrill Edge, a subsidiary of Merrill Lynch.
The study points out that a majority (63 percent) of Millennials are looking to save a set amount of money or income necessary to enjoy their desired lifestyle, compared to the majority (55 percent) of Gen Xers and baby boomers who are saving primarily so they can leave the workforce and retire comfortably.
While they may have their age-related worries and challenges, Millennials continue to be focused more on the short term, with a tendency to prioritize positive life experiences today instead of investing for tomorrow. But they are nevertheless optimistic about their financial future with the Better Money Habits Millennial Report pointing out that 80 percent believe they will, over the longer term, be better off than their parents.