Are you wondering why more young adults staying with their parents? Long gone are the days is it taboo for a teen or young adult to continue living or move back in with their parents. The pandemic along with other economic factors has made it difficult for them to make ends meet without needing more than one job to pay the bills. My older two kids have graduated from high school and both have decent jobs and they still live at home for the time being. Let’s take a look at why are young adults are still living at home.
Rent is Outrageous
According to Zumper, the average cost for a one-bedroom apartment in Dallas, TX is $1,299 and a two-bedroom apartment is $1,719. There are cheaper apartments available but typically they are in unsafe areas. Costs of housing have increased significantly in the last decade. Parents, don’t be surprised with the sticker shock of renting especially if you have been in your home for over ten years or longer. If you think your child is bluffing on rental prices, take a look around Zumper and research the real cost of renting an apartment, townhouse, duplex, or even a house.
But if you make $15.00 an hour, that is $31,200 annually before taxes, insurance, and other deductions come out of their paycheck. The dollar amount of deductions vary significantly depending on the company that is sponsoring their health insurance. In this case, let’s just assume that deductions equal $350 a month. Leaving you with a net of $2250 a month. As you can see, the cost of a one-bedroom apartment is almost half of their take-home pay.
Lack of Savings
Many teenagers and young adults, often don’t have any money in a savings account let alone money put aside for retirement. With rent prices, it makes sense to live with your parents and contribute to the bills. Then work towards saving up $10,000 or adding $2,000 a year for ten years starting as soon as possible to put into a retirement account.
After you make that huge contribution, put the remaining money into a savings account so that you have at least six months’ worth of bills tucked away before you should even consider moving out. That way if you do move out and something happens to your job, car, health, or another emergency, you have the money sitting in your savings account to sustain you. If you dip into your savings, always aim to replenish your savings account as quickly as possible.
Build a Strong Credit History
Lack of credit history can make renting difficult. Most apartments like to see good credit history and many even require three times the rent amount to be considered for an apartment. Without credit, some apartments can even ask for a higher deposit, a certain portion of the rent upfront, or insist on having a co-signer.
Good credit is very important so that when you teenager or young adult is ready to make their first car or house purchase, they can get a better interest rate. The best way to build credit is to go to your bank or credit union and invest $500 to $1,000 into a Certificate of Deposit (CD). Then borrow against your CD and pay it back on time. Or you can apply for a credit card but many fall into the trap and end up drowning in credit card debt for many years.
If you decide to use a credit card to build credit, it is very important to keep track of all of your purchases and pay off the balance immediately. Some financial experts even recommend paying two payments before the end of the billing cycle. They suggest making the first payment around day 12 and then the second payment a day or two before the due date. This will report two payments to the credit bureau.
Has your teenager or young adult moved back in due to a job loss or just graduated from college? Being at home does have its advantages and one thing that I highly recommend is to work toward reducing or even paying off your debt especially if you have student loans. Use Dave Ramsey’s popular snowball method to pay off your debt quicker. Lowering your debt now can make it easier to manage your budget especially if you end paying almost 50% of your take home pay in rent.
Staying at home after graduating high school or college or returning home due to financial struggles has its advantages. Being back at home does mean that you have to follow some rules out of respect but it can be worth the sacrifice. Young adults are taking longer than previous generations to move out due to financial and economic reason. I’ve heard of young adults saying that they have to work two or three jobs in order to pay for all their bills. Working that much without time for rest can potentially cause added stress leading to illness or health issues.