Setting Financial Boundaries With Your Boomerang Kids

You spent years raising your kids and preparing them to succeed on their own. For many parents, the years of sacrifice are worth it to watch them go out into the world and take it on with gumption. But the world you prepared them for may be much different from what you thought, and sometimes your child may need more time to truly succeed in it.

More and more adult children are choosing to move back home with their parents for several different reasons. This group of young adults is called the Boomerang Kids.

Why is this group of young adults called “Boomerang Kids”? Well, just like the popular toy they’re named for, they go out into the world and come right back.

A weak economy. Record unemployment rates. A student loan crisis. It’s been rough for the younger generations.

Millennials, often nicknamed the “Boomerang Generation,” experienced the Great Recession just as many were coming of age, graduating college and entering the workforce. This economic downturn caused many to change the face of adulthood and postpone big milestones, like getting married, buying a home and starting a family of their own. And now, they’re experiencing yet another recession.

For younger millennials and older Gen Z-ers, COVID-19 has made their futures are unclear, as we have yet to get a global pandemic under control and have yet to see just how much damage it has done to the economy. We do know one thing, so far: it officially put the U.S. in another recession and caused unemployment rates to hit 14.7%, a record-high since 1939.

Millennials and Gen Z-ers have something else in common: student loan debt. Total student loan debt in 2020, so far, is almost $1.6 trillion – the highest it’s ever been – according to Forbes, with the average amount owed for those graduating in 2018 at $29,200. With such high debts, it’s hard for anyone to get a good financial footing. And with steep monthly payments, some graduates may have to choose between making rent or making sure they don’t default on their loans.

Parents may also be part of the problem, as their awareness that their children are growing up in a much different world can cause their compassion to lead to enabling. We can’t blame them. How can you read the above statements and not feel sympathy for today’s young adults?

But there’s a fine line between helping your child succeed and helping them slack off. So how do you know if you’re enabling? If you’re providing financial assistance to help them get out of their current situation, but they aren’t changing their habits, actively applying for jobs or diligently trying to change their circumstance in other ways, you’re more than likely contributing to their problem, not helping it.

According to a survey by Porch, adult-age children cost their parents an additional $459 per month, on average, by living at home. That’s almost $500 that could be used to reduce financial stress, spoil yourself (you deserve it!) or save for retirement. And if you have adult-age children, chances are you’re nearing retirement or are already there.

According to a survey by Bankrate, 50% of respondents have sacrificed or are currently sacrificing their own retirement savings to help their children out financially. You read that right – parents of Boomerang Kids are putting their retirement at risk in order to help their children.

Here’s why that’s a problem: you don’t have the time to make up for that lost money. If you reach retirement and realize that you don’t have enough saved, you could be forced to work years longer than you planned, go deeper into debt or rely on your child, who may not be financially prepared to help.

Your kids have time to rebuild after financial mishaps and have many years ahead of them to save for retirement and grow their savings with compound interest. You don’t. Right now, your retirement and financial future should take precedence over your adult child’s. Put your mask on before anyone else’s.  

That’s why setting financial boundaries with your boomerang children is so important.

Setting financial boundaries helps protect you now and in the future. It helps, in part, ensure you’ll have enough money to last through retirement. It also protects your adult child’s future. It forces them to be more financially responsible and helps prepare them for life out of the nest.

It may also make them want to leave the nest sooner. That’s because financial boundaries make things less comfortable. With boundaries in place, they’ll crave the freedom to live and spend money on their terms. They won’t get comfortable having everything handed to them and won’t lose any motivation for moving out and on with their lives.

Not sure what boundaries to set? Start with the following and go from there.

Charge Rent

Charging rent accomplishes a few things. It can help you out financially by putting some money back in your budget, allowing you some breathing room if you’re strapped for cash or giving you more money to put towards your retirement if you’re not. More importantly, it helps your adult-age child learn financial responsibility. It gives them a fixed cost, which helps them better manage their money to meet that expected cost. Paying rent also makes them feel like they’re contributing and working for something, which can build self-confidence and pride.

Just remember that a rent payment may take away from the amount they can be saving, so consider a more affordable amount that will allow them to save money, too. 

Share Household Costs 

If paying rent is too much for your child at the moment, consider having them help with household costs instead. While the monthly mortgage or rent payment doesn’t change when an additional person moves in, your utility bills and grocery budget does. Hold your child accountable for this change in the monthly budget and ask them to pay the difference. 

Reconsider Your Lending

There may come a time – or two – when your adult-age child may ask to borrow money. Figure out ahead of time if you’d be willing to lend it to them. If you’re not, say no from the get-go. Tell them to ask someone else and stick to it. If you are willing to help out, decide and discuss with your child ahead of time the maximum amount of money you’ll lend and what you will and won’t support financially. Make sure lending money doesn’t become common practice or expected. Never lend money to your child if you’re struggling financially.

Keep in mind that emergencies may happen. If you do opt to let your child borrow money, make sure you create a plan for them to pay you back. Decide how much they must pay you each week or month until it’s paid off. If they miss a payment or the money isn’t paid back, refuse to lend to them again.

Provide Financial Guidance

While many Boomerang Kids move back home so they can reach significant financial goals, like saving for a down payment on a home or paying off their student loans, others move home because they are struggling with their finances. If this is the case for your child, use this time at home to provide financial guidance.

If they don’t have a budget, help them establish one. First, make a list of their monthly expenses, including rent, groceries or utilities you’ll be charging them, and their due dates. Then, subtract these expenses from their monthly income. Have a plan for the money that’s left over. How much will they save? How much will go toward additional debt payments? How much will they have left to spend on nonessential needs?

If they are struggling with debt, help them create a plan for paying it off. There are several methods for tackling debt, including the debt snowball or avalanche methods. It’s going to take more than paying the minimum payment on each loan to pay it off, so decide if you want to pay the smallest debt off first (snowball) or the debt with the highest interest rate (avalanche), then make additional payments to that debt only, while making minimum payments to the rest until the first debt is paid off.

To figure out what method to use, have them list every debt they have, including the total balance owed, minimum monthly payment and interest rate. Actually seeing just how much they owe may help provide the kick in the pants they need to deal with it.

Saving money is one of the skills that will help them move out faster. Work with them to learn how to save money and what to save for. Their priorities now should be building an emergency fund and saving money for a living space of their own – whether a down payment on a home or first month’s rent and security deposit. A budget will help them find places to save extra money, along with these 10 ways to save money. If you’ve had success with saving, share your wisdom as well.

If you’re struggling with finances yourself and don’t feel like you can give the best advice, read our personal finance tips and educational articles with your adult-age child and work on creating separate plans together.

As long as you set the right boundaries from the beginning, you can enjoy the benefits that come with having one or more adult-age children living at home. If your kids are helping pay rent and maintain the home, they can help lessen your financial burden and get more things done around the house, especially if they’re handy. You may also feel safer and less lonely at home and get to enjoy spending extra time with your children and getting to know them as adults – a gift that other parents may not get.