A recent survey shows that more adult children are returning home to live with their parents. This pattern has emerged in the past (almost always associated with economic downturns) and this time is no different. As the economy struggles, it becomes more difficult for young people to gain their independence.
Psychologist Jeffrey Arnett suggests that there is a new age classification, emerging adults, which bridges the gap between adolescence and adulthood. According to his theory, people in their 20s go through a time of development that’s distinct from other stages of adulthood, and this developmental period explains some of the reluctance of adult children to leave the nest for good.
If this theory is true, though, why should the number of “boomerang” children increase during times of economic hardship? It seems more likely that young people are experiencing failure to launch because of the financial difficulties of living alone during a recession. It’s certainly not an easy task. With fewer jobs to choose from and more competition to fill those slots, high school and college graduates have a harder time finding meaningful employment and an even harder time transitioning out of those entry-level jobs and into careers.
Statistics of Boomerang Children
Approximately 13% of adult children between 18 and 29 move back in with their parents after an attempt to live alone. Of these, the majority are female, and the vast majority state that the economy forced them back into their parent’s homes. Additionally, fewer young adults are working than at any time since the 1950s, and college enrollment is at an all-time high.
Unfortunately, going to school doesn’t have as positive of an effect on a student’s future as it once did. For many, graduating college manages only to increase the individual’s debt without leading to job opportunities. With so many people graduating college, a degree does not have the same coveted rarity as it once did, and there are simply not enough jobs to go around for everyone to enter their dream career right out of college.
There are only so many high-paying career choices available, and the growing income disparity and diminishing middle class makes it harder than ever to maintain a lifestyle on an entry-level salary. Living on minimum wage is impossible, and many entry-level jobs pay less than twice the level of minimum wage — still barely enough to maintain an average person’s lifestyle.
It’s not that developing a career is impossible in a struggling economy. It does take time, however, and more and more young adults are finding it difficult to balance collegiate and consumer debt with low-paying entry-level jobs and high cost of living. For these graduates, they are often faced with a choice between doing what it takes to make ends meet on their own or living with their parents until they can weather the economic storm.
The Age of Entitlement
Of course, not all young people are returning to their old bedrooms. Many have chosen other ways to combat the economy, such as simplifying their lifestyles, living with roommates or working relentlessly toward a career. What makes the difference between enterprising and successful young adults and those who lack ambition? According to some, entitlement may be the answer.
Researchers suggest that Generation Y has an inflated sense of self-esteem that clashes unpleasantly with the harsh realities of the modern world. Kids grow up believing that they’re special, talented and can be anything they want to be, and when that doesn’t always pan out, they easily fall into chronic disappointment and despair. In essence, the idea seems to be that if they cannot have exactly what they want, there is little point in trying; rather than working relentlessly toward their goals, these entitled youngsters simply give up.
Can this harsh assessment be the only explanation?
While many 20-somethings can be classified as lazy and entitled, many others are eager to live independently but simply lack the know-how to survive on their own. Balancing entry-level pay with high cost of living and substantial debt is a challenge that many young people are not equipped to face.
Fortunately, financial responsibility is a skill that can be learned, and young people can adapt to the difficulties posed by the economy; one day, when the economy stabilizes or they break into a more stable career, these same frugal choices can lay the groundwork for a long-term, financially healthy lifestyle.
The Role of Economic Responsibility
The other side of the boomerang generation is a population of young people who have embraced frugality as a lifestyle. Rather than become overwhelmed by the challenge of today’s economy, they’ve chosen to pare down their lifestyles to the bare essentials. This allows them to live independently while pursuing the career that they want; rather than pursuing high-paying jobs as a way to maintain their comfortable lifestyles, they’ve chosen to reduce their living expenses.
You don’t have to subscribe to the full philosophy of voluntary simplicity to benefit from its teachings. At its core, the movement relies on the same smart money choices as any other type of responsible personal finance. Teaching these lessons to our children while still young and instilling them with these values may help empower them to become independent as they grow older, regardless of the state of the economy.
There are several habits that financially successful young people share:
— Spending in cash and avoiding all consumer debt
— Buying used goods and making things rather than buying them
— Creating and sticking to budgets
— Putting aside money first and never touching savings except in true emergencies
— Holding second jobs or lucrative hobbies for extra income
Parents can help prepare their children for independent life by teaching them financial principles at an early age. The sooner a person learns about budgeting and maintaining credit, the more easily they can begin building a lifestyle of frugality until long-term career goals can be met. Even after a successful career has been established, they may find that they prefer the simpler lifestyle and continue living simply while padding their savings accounts.
Coming Home: Good for the Family?
There’s a flip side to the debate about adult children returning home. Depending on the situation, moving back in with mom and dad can actually be the wisest choice a person can make. The majority of people living at home with their parents continue to work full-time or part-time jobs, allowing them to pool their resources with other family members. This increases the overall income of the household and helps reduce stress on any individual family member.
Living back home also enables a young person to reduce their expenses and focus on saving money. Rather than struggling to make ends met, they can put money aside in savings accounts or investments and begin growing a nest egg. Considering the high cost of living throughout the nation, a substantial amount of money can be saved if the individual does not have to foot the entire cost alone.
Of course, using this interim as an opportunity to grow wealth and build a financial groundwork is only effective if the individual is committed to saving money. People who use their parents as a safety net with no greater financial goal in mind are doomed to never launch away from home; those who use it as a carefully-calculated stepping-stone to a more successful life are much more likely to launch successfully and stay independent.
Whether embracing a simplified lifestyle or using the time spent at home to build a savings account, it’s imperative to begin with good financial sense. Only people who understand how to live within their means can achieve true financial independence, and laying down the groundwork for this at a young age can help reduce the long-term damage of bad financial choices no matter the state of the economy.