Tis the season of graduation in my house. I am up to my eyeballs in emotions and busyness that in my experience is only generated by weddings and graduations. While my second daughter will be leaving the house to go to Purdue in a few months, many young people are of course graduating from college right now as well. And many of them are coming home.
According to census data quoted on Fox Business, more than a third of young adults ages 18 to 34 lived with their parents in 2015. While I’m sure there are parents right now cringing as they read this column, if handled smartly, “coming home” after graduating college can offer an opportunity to both parties (parents and kids).
I have had the opportunity to experience the return home experiment both from the graduate’s point of view and from the financial adviser’s point of view, and I’ve developed what I think are some best practices (financially speaking of course; good luck with the rest).
When I came home after graduating Purdue into the tail end of a recession in 1993, my Dad (yes, in my view Dad) charged me a nominal rent for my luxurious basement abode. He openly announced he was actually storing my rent payments for my benefit in an account. It was made quite clear this rent account was to be used in a few months as either a deposit on an apartment or a down payment on a house.
I liked the technique, and it worked. I was out of there in about seven months. The flaw in the program was when I got tight on money, I skipped some rent. In order to keep the peace, Dad let it go. Try this in the “real world” and it leads to evictions and wrecked credit.
I next observed this “it's best not to pay Mom and Dad” phenomenon when launching my oldest daughter. On the way to the airport for her graduation present trip, I told her when she got back in three weeks that she was going to be paying her own car insurance and cell phone bill. She seemed perplexed and asked me if she "was going to pay me, or pay the companies directly?" I realized she had never actually paid a real bill, and at that moment the skill of “paying bills” became something I no longer took for granted.
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There’s something about tracking due dates, learning about late fees and possibly even service interruptions that just can’t be simulated.
So, I started watching other families navigate the launch process and discovered my favorite technique. One of the largest families in my practice is full of successful young adults. The young adult children are all pursuing advanced degrees, jobs and marriage engagements. From time to time, circumstances do lead one or more of them home for periods of time.
When they arrive, it is just known that they will be delegated a bill or two to pay. The utility bill, the cable bill, the water bill, the trash bill. I’ve even seen Mom require groceries be bought and paid for. The young adult boarder pays the service provider directly and deals with due dates and late fees. Of course, Mom has to keep an eye on anything getting too behind and out of hand, but I can’t imagine a more terrible shame than having your Mom’s cable turned off because you didn’t pay the bill. To my knowledge this has never happened.
I feel like this simulated responsibility saves the parents a little money, makes the young adult feel like a contributor, enables them to practice actually paying service providers directly, and as most household bills are between $150 and $300, it should enable them to save money to eventually launch themselves.
While no technique works for every family, there’s a lot to like about this one. If you have any launch stories of your own, feel free to email me and send them over.