The Pros And Cons Of Living At Home With Your Parents To Save Up For A House Of Your Own
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Living at home with your parents as an adult can actually be pretty sweet. Think home-cooked meals, built-in emotional support, and a sense of stability in a world that can feel pretty chaotic.
Sure, there are challenges to living with family, but there’s also a lot to love about it. Whether you’re binge-watching your favorite show or just shooting the breeze, there’s no denying the joy of having people you love around you.
There’s also the satisfaction that comes with saving money on rent or a mortgage.
In some cases, it’s a lot of money.
How much money can you save living at home with your parents?
The amount of money you can save by living with your parents varies depending on your individual circumstances, but it can be significant. Let’s consider some examples. Note this obviously varies city-to-city.
Assuming an average monthly rent of $1,500 (which is on the low end in some major cities), a person who chooses to live with their parents can save $18,000 per year on rent alone. On top of that, they could save money on utilities, groceries, and other household expenses, which could easily add up to an additional $6,000 or more per year. This means a person could potentially save over $20,000 annually just by living with their parents.
That’s a nice nest egg to invest or save for a down payment on a place of your own.
Another example to consider is student loans. According to the Federal Reserve, the average monthly student loan payment is $393. By living with their parents and using the money they save on rent and other expenses, a person could put an additional $20,000 towards paying off student loans in just 4 years.
Of course, it’s important to consider the potential downsides of living with your parents, such as limited independence and privacy. There is also a concern among some parents near retirement age that “boomerang kids” could delay retirement.
However, financially speaking, living with your parents can be a smart move for those looking to save money and pay off debt.
How many young people and millennials are living at home with their parents?
According to recent studies, there has been a significant increase in the number of young people and millennials choosing to live at home with their parents. In fact, in 2020, more than 52% of Americans aged 18-29 were living with their parents, which is the highest percentage ever recorded.
According to Pew Research Center, it’s possible that the only time in history when more people lived with their parents was during the Great Depression in the 1930s – but with no data to back it up, we can only speculate.
One of the primary reasons for this trend is financial strain, as many millennials are dealing with high levels of student loan debt and low wages. Also notable: 2020, the year of the Pew survey, was the beginning of the coronavirus pandemic, where a flood of college students in that age demographic were pretty much forced to move back in with their parents.
The National Association of REALTORS® analysis of Census Bureau data offers another number, analyzing people age 25 – 34. That’s post-grad years when many are in the work force.
It also offers a speculative analysis about millennials living at home: After hitting an all-time high during the pandemic (the most since 1960), it looks like young adults are finally starting to spread their wings.
In 2022, only 15.6% of 25 to 34-year-olds lived with their families, down from 17.8% the previous year, according to the National Association of REALTORS®. While this is a step in the right direction, the percentage is still high compared to historical norms, which tend to be under 10%.
For Gen-Zers and millennials in the work force, however, living at home can be a financially savvy move. By staying with their parents, millennials can save money on rent, utilities, and other household expenses, which can help them pay off debt and save for the future.
Additionally, by living at home, millennials have the opportunity to build up their emergency savings and invest in their education or other long-term financial goals.
While it’s not always the ideal situation, choosing to live at home can be a smart move for millennials who are looking to achieve financial stability in an uncertain economic climate.
How could young people and millennials living with their parents affect the housing market?
It’s a major bummer that housing prices are at an all-time high, making it tough to afford both renting and buying.
There are a number of factors that contribute to the high cost of the housing market. Boomerang kids that are now ready to leave the nest with fistfuls of cash saved for a place of their own is potentially one of the reasons.
It’s classic supply and demand.
If more young adults are living with their parents instead of renting or buying their own homes, this can decrease the number of people looking for new housing, which can lower demand and ultimately reduce the upward pressure on prices.
On the other hand, millennials living at home may also be driving up demand for larger, more expensive homes. If young adults are living with their parents for longer periods of time, they may be saving up more money for a down payment, which can allow them to afford a larger or more expensive home when they finally do move out. This increased demand for larger homes can contribute to higher overall housing prices.
Another factor to consider is that many millennials may not be able to afford to buy a home even if they wanted to, due to high student loan debt and other financial challenges. As a result, even if more millennials were looking to buy homes, they may not be able to afford the high prices, which can contribute to a decreased demand for housing and may ultimately result in a leveling off of prices.
In a report, Jessica Lautz, deputy chief economist and vice president of research at the National Association of REALTORS®, noted how the bet of living at home with mom and dad paid off.
“It is possible that moving home allowed these young adults a financial boost that they would not have had otherwise. It could have translated into savings, paying down existing debt, and working on their credit score and debt-to-income ratio.”
Lautz also notes the correlation between the influx of people leaving home with a 14% rise in rents from 2020 to 2021 due to increased demand.
According to NAR data, there has been a significant increase in first-time home buyers who move directly from a family member’s home, climbing to 27% in 2022 from just 15% in 1995.
Living with your parents as an adult can be a financial game-changer if you’re looking to save for a down payment on a house.
Sure, you’ll save on rent and other living expenses, but let’s be real, privacy is out the window.
On the upside, you’ll have more time to tackle that debt and build up an emergency fund. Just keep in mind that the housing market is as unpredictable as the weather, so there’s no guarantee that you’ll be able to afford a house even after saving.
So, weigh the pros and cons, consider your social life, and think about your overall well-being before making any moves.