Some people think that moving back with their parent after graduation is not a good way to establish financial independence. But this seems to be a trend for a lot of Millennials. On top of their mounting student debts and their lack of credit history, is this another proof that Millennials are not as financially smart as we thought?
Study reveals that 14% of Millennial graduates are living with parents
A study done by Gallup.com revealed that 14% of those aged 24 to 34 are still living with their parents. This study was published on February 2014 on their site. Although these young adults are past their college years and are expected to be living on their own, they have decided to delay financial independence by living with their parents after graduation. Some of them are even in their marrying age already and yet they have chosen to stay with their parents.
The ones younger than them, 18 to 23 years, have the majority (51%) living at home. In total, 29% of those under the age of 35 are still living in their parent’s home.
This study was conducted back in August 7 until December 29, 2013. The Gallup analysis mentioned that establishing the independence of an adult is important right after college. This independence, in particular, involves their separation from their parents. They are expected to find their own living arrangements and a job that will help support themselves. This leads them to make their own plans for the future that includes the assets they will acquire (e.g. home or car) and the family that they will have.
All of these are compromised when the young adult decides to live with their parents after graduation.
When is it a good idea to delay being economically independent
While the decision to live with their parents can have an effect on their future, there are instances wherein they are forced into the arrangement. Here are 4 reasons that we believe is justifiable for a young adult to move back in with their parents.
Pay off debt. Student loans can really be a big problem for college graduates. A Bankrate.com study revealed that 27% of those between 18 to 29 years old are less comfortable with their debts compared to a year ago. In some cases, college graduates have to deal with more than $100,000 of debt. While they can pay it off in 10 years, it is still a scary financial situation to be in. If they want to move in with their parents to help save for debt payments, that is a legitimate reason. It is one of the extreme measures to beat student loan debt and it can be really effective.
Job market. If you combine huge student loans and the tough job market, it can really make financial independence less of a priority for a lot of new graduates. It is tough to settle for just any job especially if you got out of college with an idealistic point of view. Most of these young adults would want to get the ideal job for themselves but they also have to weigh in the need to finance their living expenses. This is where moving in with parents will make a lot of sense.
Build up savings. Another reason is to build up savings. It can be an emergency fund or to save up for the down payment for their own home. Living with their parents will allow them to cut back on costs that would have eaten a huge amount of money had they rented an apartment.
Emotional support. All of these combined can seriously discourage any young adult. Having a lot of hope for the future can be quickly doused by the tough job market and the mountain of debt that new graduates have to face. In some cases, retreating to the familiar place called home can really help strengthen the resolve of Millennials. It will not only help them stabilize their finances, it will also equip them with the emotional support that only parents can provide.
The Gallup study have the same ideas about why Millennials are moving back in. They revealed that delaying financial independence has become the norm for some of them simply because of too much debt, tough job market and the high cost of living. In some cases, the reason to live with parents is a necessity that is brought about by sickness – usually with the child having to care for an ailing parent.
Although you may think that delaying your financial independence is a bad thing, it is really not all that disastrous. Sure there are financial decisions that you will not be able to make when you are living with your parents. However, it can lead you to a more financially secure future – at least if you do it correctly. If you move out, you will never have the chance to build up your savings as much as you can if you lived with your parents. The money you will save alone can make your life more financially secure.
How to live with parents and still end up financially independent and secure
Contrary to what you may think, living with your parents does not have to delay your financial independence. There are so many ways for you to exercise your independence even as you live in your parent’s home. It can be done despite the many financial concerns that comes with being young and single.
Here are some of our suggestions.
Look for a job. Do not be a financial burden to your parents. If you really want to wait for the right type of job, you have to at least get any job that will let you earn your own keep. Just make sure that it allows you to go to interviews, etc.
Pay rent to your parents. This will help shoulder the cost of your board and lodging. Or you can shoulder some of the bills that you usually get a home. It can be the utility bills or you can volunteer to shoulder the food costs.
If possible, do not live in the main house. If you have a backyard and the zoning laws permit it, you can opt to build a tiny home that will allow you to live on your own. You can hook up to the main house for some of your utility needs and just pay your folks rent. That will help lower your overhead costs so that you can save up your money.
Set a schedule to move out. We strongly encourage you to still aim to live on your own because that is how you can truly be financially independent. That being said, make sure that you set a scheduled for your moving out day. That will pressure you to work hard to meet your deadline.
If you think that living your parents is bad, you may want to read the article from MarketWatch.com that discusses life with your parents after graduation. According to the article these are the experiences of those who moved in back home after college.
They got emotional support after a personal misfortune and while switching to a new job.
They were able to survive joblessness, low wages or high costs of living arrangements.
They were able to save money before buying their own home.
They were able to avoid the housing market crash because they were still with their parents and saving up for the down payment of their future home.
They got help in paying off their student loans.
They got “two mature roommates” who gave them advice about their future plans.
The article mentioned that most of the young adults who moved in back at home paid some form of rent to their parents.
With the savings that young adult make, it seems a good idea to delay financial independence if that means they can save up for a more financially secure future. The stigma of living with your folks is not that embarrassing anymore – considering the tough economic conditions that Millennials have to face.