The Pros and Cons of Living at Home vs. Moving Out
By the summer of 2020, the pandemic had forced about 3 million young adults to move back in with their parents or grandparents, according to CNBC. Eighty percent of them were believed to be members of Generation Z. Today’s recent high school and college grads are hardly the first to face the conundrum of leaving the nest before they’re ready or sucking it up and moving back home until they’re better prepared. But the virus certainly raised the stakes and took away a lot of options.
Now Is a Tough Time To Strike Out on Your Own
Today’s grads are entering one of the tightest rental markets in years. Some places are more difficult than others, but high prices and limited units are par for the course nationwide.
“As rent prices climb, moving back home makes the most sense financially for new graduates,” said Erica Seppala of MerchantMaverick. “Rental rates increased by 11.4% in the first half of 2021. As a result, renters are spending 30% or more of their income just on monthly rent. Moving back home allows young people to avoid being overburdened by these rising costs and helps prevent accumulating debt.”
Even When Rent Is Cheap, Free Is Always Better
When living at home rent-free, young adults can pour nearly every dollar they earn into savings — a luxury they’ll almost certainly never have again. That luxury allows them to build up a financial cushion much faster than if they were paying the landlord every month.
“By living with their parents, money typically spent on rent, utilities, and other bills can be put away, making it easier for younger people to put money down for a home or become more financially secure before venturing out on their own,” Seppala said.
Building savings is only one option. They might instead choose to build their resumes.
“Moving back home can help new graduates get job experience,” Seppala said. “Accepting a lower-paying job — or even a low-paid or unpaid but prestigious internship — makes the most sense when someone lives at home and isn’t burdened with financial obligations. This job experience can help a recent college grad obtain a higher-paying job in the future, making them more prepared for living on their own.”
Finally, living rent-free offers a golden opportunity to forge a financial profile that will reassure lenders and landlords when it does come time to rent or buy.
“Moving back home makes it easier to build credit,” Seppala said. “With fewer financial obligations, recent college graduates that live at home can boost their credit with a few responsible financial moves. For example, getting a credit card, using it responsibly, and paying it off each month can add points to a credit score.”
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The Downside, of Course, Is That You’re Back Where You Started
Depending on your relationships and family dynamics, moving back home can quickly start to feel like a step backward — and it’s easy to fall back into the parent/child roles that defined your childhood.
“Moving back home means a loss of independence,” Seppala said. “Following house rules, being advised how to spend money, and not having freedom can be particularly difficult, especially for those who lived alone while attending college.”
And without discipline and focus, it’s easy to squander what could have been a golden opportunity to save cash, build credit and prepare for life outside the nest.
“Moving back home can make it difficult to become financially independent,” Seppala said. “Living rent-free makes it easy to spend money without thinking about the consequences — an expensive dinner, a night of drinks with friends, or a shopping spree may not seem like a big deal. Parents can and should help their children be responsible with money by encouraging them to save or even by asking for small monetary contributions toward rent, utilities, or groceries.”
Don’t Let Social Stigma Make Your Decision for You
Despite changing times, old stereotypes still stigmatize young adults as loafers or losers for moving back home. Keep in mind that if it’s part of a strategy, it’s not a regression — no matter how much it might feel that way at the time.
A 23-year-old lifestyle and finance blogger named Gabby James recently moved back home after school — with her new husband in tow.
“I graduated college and got married within the same year while in a pandemic,” James said. “My husband started medical school and I started graduate school a few months after the wedding. We had no income. We were living off student loans and ramen noodles when we made the decision to move back home. With thousands of dollars of accumulated debt between us, we decided the best option was to live in my parents’ house. Being newlyweds and moving into your parents’ basement is not the most ideal situation, but it was the best financial decision for us. We couldn’t afford to pay thousands of dollars in rent every month while in school with no paycheck coming in.”
She had a front-row seat to both the benefits and the drawbacks.
“Moving back home definitely has its pros like spending more time with family, seeing old friends, and saving money on rent,” James said. “Moving back home has also come with some challenges though, one of the biggest ones being lack of privacy and space. You’re always trying to find that balance between making yourself feel at home and being sensitive to the fact that it is not your house.”
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Last updated: Sept. 14, 2021