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How to Manage Your Money When Adult Kids Move Home

First, figure out finances to make for a happy multigenerational household

Chatzky: Adult kids at home

Zohar Lazar

When people move in, agree about how they'll be contributing and what they'll get in return.

En español | It's no secret that the multigenerational household is coming back. What's surprising is how well those of us in the middle of the sandwich are embracing it.

According to a MoneyRates.com study of 2,000 adults, about 85 percent say the door is open to adult kids who move back home for financial reasons. Those who have already experienced multigenerational living feel pretty positive about it, says Richard Barrington, a senior financial analyst for MoneyRates: "Some say they enjoy it. Very few say they regret it." But if there's anything that can muck it up, it's money. Here's how to navigate the transition financially.

Look forward

Your youngest child is a senior in college. Time to downsize? Not so fast, says Nanette Freedland, a Los Altos, California, marriage and family therapist. Look to the horizon first. Some 36 percent of all 18- to 31-year-olds were living at home in 2012, the Pew Research Center found. Anticipating a boomerang child seems the odds-on thing to do. Think about furnishing — hello, sleeper sofa — with this in mind.

Get specific

You and your new cohabitants need to agree about how they'll be contributing and what they'll get in return. In the case of adult children, "there is absolutely a responsibility for the family to request some [financial] contribution," says Freedland. Will they be paying rent, chipping in for utilities or food, maintaining their own cellphone? Work that out before they move in, and discuss how long the arrangement will last. (Among parents who said they'd let an adult child move in, most thought this should be for a year or less.)

Show your cards

You need to be clear about who's paying for what. "It's not as if the middle generation is exactly flush," Barrington says. "People are behind on their own retirement savings, and while the younger generation has had trouble getting jobs, their parents have had a hard time getting raises." Children don't always know how tough their parents have it financially. Now is the time to share.

Break the cycle

Last, says Charleston, South Carolina, financial adviser Tim Maurer, don't put your child's financial needs over yours. If you're the support system and put your situation at risk, the system collapses — then everyone is in trouble. "As they say before every flight, put on your own oxygen mask before you help others."

What about your folks?

When it's your parents, not your kids, who show up with suitcases in hand, 79 percent of adults say the door is open. But the scenario is different for one big reason: This isn't likely to be temporary. So …

Assess the situation

Why is Mom moving in, asks therapist Nanette Freedland. "Does the family not believe in nursing care, or do they lack funds?" If the former, there may be resources to contribute to her ongoing living expenses and care. If the latter, your budget may have to morph to make room.

Can funds be freed up?

Consider not just Social Security and pensions, but home equity, says financial adviser Tim Maurer. If Mom's house is sold, you can use the money to finance an addition to your home or pay for care.

Open a dialogue

Before you call contractors, sit down and discuss tactics. Will Dad's proximity mean reducing after-school child-care expenses? Should Mom set up a monthly transfer of funds? And what's the process for making changes? Finally, include siblings if they're expected to chip in. "The goal is to figure out how [your parents] can be participating members of the family, not just a drain," Freedland says.

—With additional reporting by Arielle O'Shea

Jean Chatzky, best-selling author, journalist and money editor at NBC's Today, is AARP's financial ambassador. Want more advice? Read previous columns at aarp.org/jeanchatzky.

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