By John Drachman
Facing his own COVID-19 financial crisis, one millennial web designer shared this recent, elegiac Tweet: “If you’re young, the next 12 months might be a good time to move back in with your family if you can,” he wrote. “I say this knowing there’s nothing cool about moving back in with your family, but it’s what I’m doing.”
Across the nation millions of baby boomer parents with an eye toward retirement, are seeing their once-empty nests filling up again with returning offspring expressing similar sentiments – and at a pace not seen since the Recession of 2008.
March job loss projections showed just how unstable the economy can get as the current crisis pushes young adults back to the burbs. (Full disclosure: Our 27-year-old daughter is now sheltering in place with us.) As college closures have impacted more than 14 million students, many would-be scholars also moved home.
Moving home has economic consequences. Since the COVID-19 outbreak, nearly a fifth of Americans have reported cutting retirement contributions to help a family member. This can be a problem for economizing boomers, says financial advisor Chris Fundora. “Even when they provide the child with a no-interest $20,000 loan, those funds rarely get paid in back in full or at all.”
“We have seen a huge uptick in traffic since March,” adds COO Allie Fleder of Simplywise. “Users of our portal with adult children find they’re exceeding monthly expenses and tapping into their savings.”
Managing the economics of sheltering in place with your young adult can benefit from the kind of ground rules AARP recommended during the last downturn. To paraphrase:
- Treat your child like an adult. Remember how well rules worked out when they were teenagers? Here’s the good news. Your children are young adults. Chances are they have been making their way pretty well until COVID-19 turned their world upside down. Most boomers can expect the kids to help with household tasks – and pay a few bills too.
- Respect the shelter. If your young adult can work remotely, you’re both in luck. (My daughter and I occupy separate work stations in different parts of the house.)
- Keep your nest egg from dwindling. If your boomerang kid is unemployed, delegate the kind of chores that will protect savings: painting the house, cleaning the gutters, cutting the lawn or helping with renovations.
- Draw up a contract. “Be transparent about expenses,” says Ms. Fleder. “Create a financial contract that states the boundaries between the parent and child” and details the child’s responsibilities. “If the child is not paying rent but collecting employment,” Fundora adds, “there’s an additional $600 that could put the family in a better financial position” in reference to the extra weekly unemployment bonus guaranteed by the CARES Act until the end of July.
The Bottom Line
Consider asking your financial advisor to help you and your young adult to draw up “a contract.” Many financial professionals know how to quarterback the multi-generational challenges that arise between parents and their offspring. Besides, by bringing your young adult into the planning process, they’ll have exposure to the kind of life lesson that will boost their odds of success in tomorrow’s post-pandemic world.
John Drachman is a contributing writer to MyPerfectFinancialAdvisor the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.