College Game Plan

More college grads move back home with mom and dad

Lisa Huckemeyer with her son Tyler
Source: Lisa Huckemeyer

Even before graduating last month with a finance degree from San Diego State University, Lisa Huckemeyer's son Tyler landed a job loaded with benefits. The 21-year-old's new position as an internal auditor comes with a 401(k) plan, phone, gym membership and even a company car, which he uses to drive to work — from his parents' house every day.

Like many millennials, he moved back home immediately after college, even though he can afford an apartment with a roommate or other type of living situation.

For the first time, more 18- to 34-year-olds live at home with their parents than in any other arrangement, according to a recent study by the Pew Research Center.

In 2014, just over 32 percent of millennials were living in their parents' home, slightly more than the number living with a spouse or partner, according to Pew's analysis of the most recent census data. Just 14 percent were living alone or with roommates.

They are also staying at home longer. This year, 36 percent of graduating seniors plan to live at home at least a year or more after graduation, according to a recent survey by the job site Indeed.

"There isn't that same pressure to move out as quickly," said Tara Sinclair, chief economist for Indeed.

Although graduates from the class of 2016 enjoy the best job market in years, the number of young adults postponing romantic partnerships and marriage has contributed to the growing share of those who are still living at home. The median marrying age has risen steadily for decades. It's now 27 for women and 29 for men, up from 20 for women and 23 for men in 1960, according to Pew.

"It used to be that people lived with their parents until they got married, maybe we are moving closer to that," Sinclair said.

In addition, sluggish wage growth and sky-high rents in many urban centers have made it unaffordable for some recent graduates to move out on their own. Even as hiring picks up, wages for new college grads have not budged, when adjusted for inflation, from prerecession levels, according to the Economic Policy Institute.

Then there are the hefty student loan bills from school, which are at an all-time high, putting a severe strain on most recent graduate's financial circumstances. Seven in 10 seniors graduate with debt, owing about $29,000 per borrower, according to the most recent data from the Institute for College Access & Success.

From a financial perspective, moving back home can provide millennials with an opportunity to start paying back loans and build up an emergency fund with a goal of getting to independence.

For millennials like Tyler Huckemeyer, who grew up during the Great Recession, it's a chance to save for major milestones, like a first home and retirement.

"I said he could live at home if he paid the equivalent of rent with a roommate, about $800 to $900 a month, into a 401(k)," Lisa Huckemeyer said. "I want him to see the beauty of compound interest."

Not only has the stigma of moving back home all but disappeared, the relationship between parents and children has changed — for the better — for this generation.

"Millennials, for the most part, enjoy their parents," said Angie O'Leary, a senior vice president in the wealth management division at U.S. Bank who works with families. "It's a different dynamic."

For parents, however, having grown children at home can be substantially more expensive at a time when their own retirement looms. From medical coverage to auto insurance, groceries and Netflix, there are hidden costs that can quickly derail even a well-padded savings account, O'Leary said.

She advises families to go in with a plan, whether it's for two to three months or two to three years. "Supplementing them while they get their feet on the ground is a great gift but the goal is to be independent."