When the Budget Calls for a Move Back Home

By RACHEL LOUISE ENSIGN

The Thanksgiving festivities are over, but three generations of Cindy Ross Vogt's family are still sitting down to dinner together in Shasta Lake, Calif.
That's because Ms. Vogt's 37-year-old stepdaughter and 15-year-old stepgrandson moved in with her and her husband in 2010, after the stepdaughter couldn't find a job and went back school to eventually become a nurse.
"I tell myself it's not going to be forever," Ms. Vogt says.
Call it boomerang living. With the effects of the lousy employment, stock and real-estate markets taking their toll, adults of all ages have been finding they can no longer afford to live on their own. So they've been moving back in with Mom and Dad—sometimes with a spouse and kids in tow—to save money and get back on their feet. Meanwhile, more elderly parents, facing smaller nest eggs and higher health-care costs, are moving in with their adult kids.
Over 50 million Americans lived in multigenerational homes in 2009, up 11% since 2007, according to Census Bureau data.
But making a multigenerational living arrangement work—whether temporary or permanent—takes frank discussions about money, household rules and expectations, experts say.

Cash-Strapped Singles

With a tough job market and record amounts of student-loan debt, more young single adults are moving back home. One in four adults between the ages of 18 and 24 moved back in with their parents during the recession, according to a 2010 Pew Research survey.
While living at home makes financial sense for cash-strapped twentysomethings, it's important for parents to establish that it's not an open-ended arrangement. Having a time frame will force your child to stick to a budget that lets him or her get finances in order and move out. Susan Ende, a psychotherapist and co-author of "How to Raise Your Adult Children," recommends six months. If your kid needs more time, discuss the reasons (not saving enough? not being aggressive about looking for a job?) and come up with a new game plan—and deadline.
Families also need to establish ground rules. If your child has a job, he or she should be expected to contribute to the household budget—be it paying for rent, groceries, car insurance or the electric bill. Put it in writing so there are no misunderstandings later on. Include the monthly or weekly amount, due date and if there are any penalties for missing a payment.

In some instances, parents don't expect their kids to pay for household expenses. But they do expect them to save as much money as possible. It's best to set an amount and time frame and put it in writing.
The goal here is to make young adults responsible spenders and savers.
Jon Marshall, 23, moved back in with his parents in a suburb of Cleveland after graduating from college in May, to save money for graduate school. His parents don't expect him to pay rent or household expenses, but he must put aside about $20,000 of his salary at an architecture firm.
His parents have access to his bank account to make sure his saving stays on track. Mr. Marshall says when he goes out and spends more money than usual, "I have my mom the next morning asking me why I spent so much."
Adult children who are out of work should be expected to aggressively seek employment. That includes taking on part-time work while they look for a job in their chosen field. They also should be contributing in nonmonetary ways, such as doing chores, running errands or taking care of younger siblings.

Mid-Life Financial Crisis

A more complicated scenario is adult children who move back in with Mom and Dad—along with their own families.
Job losses, pay cuts and the real-estate debacle have forced many adults between the ages of 25 and 44 to sell their homes—or to lose them to foreclosure. Others need a cheaper living arrangement while they go back to school.
The challenge here is determining how much financial assistance parents should provide beyond housing—and whether it's going to be a loan or a gift. If grandchildren are in the picture, grandparents may find it more palatable to simply cover their expenses. A time frame should be established, with the goal of getting the younger family back on its feet.
If the adult child or spouse is employed, then they should help pay for groceries or monthly expenses. And they should have an aggressive savings plan in place. They can consolidate cellphone plans, for instance, or sell a second car. Again, any arrangements are best put in writing with all stipulations spelled out.
Ms. Vogt's stepdaughter isn't working since she's still in school, so the Vogts don't ask her to contribute to household expenses. But they expect her to do well in school and graduate in May. After graduation, she has two months to find a job and move out.
With grandchildren, parents and grandparents need to come to an agreement about what household rules the kids need to follow, how much disciplining the grandparents will do and how much baby sitting they are willing to take on.

Parenting the Parents

It's not just adult children taking refuge with their parents. More older parents are finding it financially necessary to forego living alone.
Some have found themselves jobless a few years short of retirement. Others have nest eggs that were ravaged in the market's downturn. In some instances, seniors can no longer physically care for themselves, but they can't afford home health care or senior housing.
When a parent moves in, take stock of his or her assets (savings and investments), income coming in (salary, pension, Social Security) and any major expenses (health care). Then calculate how much a parent can contribute to household expenses and how much you and any siblings will need to dole out.
An elder-care attorney or financial planner can help you crunch the numbers and create a plan, says Joy Loverde, author of the 2009 edition of "The Complete Eldercare Planner."
After 82-year-old Marge Van Ryzin was diagnosed with a debilitating back condition in 2007, she decided she could no longer live alone. But she couldn't afford assisted living, either. So Ms. Van Ryzin helped her daughter Jean purchase a home in Gambrills, Md., that accommodates the two of them and Jean's three children.
Though she also helps with groceries and some mortgage payments, Ms. Van Ryzin says she has been able to cut her spending and put money aside in case she ends up needing long-term care.