For the boomerang generation, there are pitfalls to moving home

  • From a financial perspective, moving back in with mom and dad can provide millennials with an opportunity to start saving money with a goal of getting to independence.
  • For parents, having grown children at home can be substantially more expensive at a time when their own retirement looms.
  • In every circumstance, families should set ground rules and a time frame.
John and Colleen Story with their three daughters, Becca (left), Erin and Megan.
Source: John Storey
John and Colleen Story with their three daughters, Becca (left), Erin and Megan.

When John and Colleen Story's oldest daughter, Becca, graduated from college with a teaching degree, it was their idea that she move back home with them and save money while she got her career off the ground.

They committed to a one-year time frame and set some ground rules: They wouldn't charge her any rent and there would be no curfew.

At the end of 12 months, Becca had saved more than $15,000 and moved out on her own. "It put her on a great financial path," said John Story, 60, and "we had a lot of fun."

Of course, not all experiences with boomerang kids are as rosy.

Today's young adults are significantly more likely to be at home for an extended stay compared with previous generations of young adults who lived with their parents, according to a study by the Pew Research Center.

Fifteen percent of 25- to 35-year-old millennials were living in their parents' home as of 2016, according to Pew's analysis of the most recent census data.

Although graduates from the class of 2018 will enjoy one of the best job markets in years, sluggish wage growth and sky-high rents in many cities have made it unaffordable for some recent grads to move out on their own.

And even as hiring picks up, young workers still face a tougher labor market overall, according to the Economic Policy Institute.

The number of young adults postponing romantic partnerships and marriage has also 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.

Then there are the hefty student loan bills from school, which are at an all-time high, putting a severe strain on most recent graduates' financial circumstances. The average outstanding balance is $34,144, up 62 percent over the last 10 years, according to Experian.

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

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.

"There are a lot of benefits to the child but parents need to pay attention to their own budgeting and retirement plan," said Jennifer Fox, president of Wealth Management at Bryn Mawr Trust.

"It's really important to have a candid conversation with your child about what it means to live at home as an adult," Fox said, including the possibility of charging rent and how shared expenses will be divvied up. "We recommend that you put these parameters in writing with a time frame."

In fact, adult children returning home can have a substantially negative impact on parents' wellbeing, according to a recent study from the London School of Economics published in the Journal Social Science & Medicine.

"Don't be so quick to say yes," said Jonice Webb, a clinical psychologist and the author of "Running on Empty No More: Transform Your Relationships." "It's the parent's responsibility to make that child sufficient," she said, "that's the No. 1 goal."

If you can afford it and want to help, Gina McKague, the president of McKague Financial in Livonia, Michigan, advises clients to lay down ground rules and resist giving them a rent-free ride. "If you make living at home too convenient, you may have a live in roommate for life," she said.

"Even if you save the money you charged as rent, make that a 'go gift' — you'll also teach them the power of saving and how a little bit at a time can really add up."

More from Personal Finance:
Get ahead of student loan debt with these three tips
Trump opens a door to student loan forgiveness
Graduates of this college get a starting salary of $80,000

Contact Personal Finance

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    Get these newsletters delivered to your inbox, and more info about our products and service. Privacy Policy.