Boomerang kids. You've probably read articles about them or may even have one yourself. That's where parents reopen their formerly empty nests to adult children who are trying to pay off student loans or bills, save for a down payment or regroup after losing their job.
Recently, a similar - if inverted - trend has emerged where millions of parents have begun moving in with their adult children. Social scientists call them "boomerang parents."
Sometimes parents move in with their grown children for companionship, to help out with the grandkids, or because they need physical assistance as they get older. But it's not always elderly or infirm parents: The soured economy has pounded people in all age groups.
I can think of several financial reasons for the Boomerang Parent phenomenon:
• Many people have seen their nest eggs diminish so significantly that they can no longer afford to pay for basic necessities like rent, food and medicine.
• Others have watched their net worth drop because of plummeting real estate values or from borrowing too much against their home's equity.
• And still others may have been completely priced out of retirement community housing or nursing homes and have nowhere else to turn.
Of course, having multiple generations living together is nothing new, especially in certain countries and cultures. But here in the U.S., recent generations have aspired to home ownership, or at least, to moving out on their own in early adulthood; plus many people are forced to move far from their home towns to find work, thereby splintering the family.
For family members used to their own independence, living together again can put emotional - and financial - strains on their relationships. Here are a few things to consider before merging households:
Open communications. Just as with marriage, you should candidly discuss any potential issues or personality clashes and settle former disagreements before moving in together. Adult children and parents alike are used to running their households a certain way, so flexibility and mutual respect are essential.
Set house rules. Make sure both sides understand the terms of your "contract" for living together. For example:
• Consider divvying up chores and responsibilities, keeping in mind physical limitations older family members might have.
• Allocate space and scheduling to ensure everyone's privacy, including children in the household. If they're being forced to give up their room or curtail activities, make sure they understand and accept the situation.
• If you have a history of arguing, agree which topics will be off limits.
• If grandparents are going to be providing childcare, set boundaries on what's expected so neither party feels taken advantage of.
• Similarly, if you will be caring for older parents, make sure to build in adequate relief time so you won't feel overwhelmed by the responsibility.
Discuss your respective financial situations frankly. Chances are at least part of the reason you're be living together is to economize, whether to pay off bills or boost savings. But don't mistake free rent as license to go on a spending spree. You might want to develop a joint household budget, identifying sources of income, shared expenses and savings goals for each party.
Numerous free budgeting tools, including interactive budget calculators, are available online at sites such as the U.S. Financial Literacy and Education Commission's MyMoney.gov , the National Foundation for Credit Counseling , Mint.com , and MSN Money .
Understand tax implications. If you become your parents' primary caregiver and provide more than half their annual support, you may be able to claim them as dependents, which could significantly lower your income tax. The rules are complicated, so consult a tax professional or review Publication 503 at the IRS website to see if you qualify.
There are many helpful resources available to help you sort out issues related to multigenerational households. For example, to find a local agency that can help locate eldercare services, visit the U.S. Department of Health and Human Services' Eldercare Locator . ElderLawAnswers has a helpful guide called "How to Prepare When Elderly Parents Move in With Adult Children". And Caring.com has helpful advice and blogs on a variety of related topics.
There are many potential personal and financial rewards to becoming a boomerang family. Just be sure you understand all the implications before signing on.
This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to your situation and about your individual financial situation.
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