Family · January 21, 2021

Preparing Financially for Your Adult Children to Move Back In

Having adult children living at home has become a common reality for many parents. The trend began to pick up steam partly due to the increased unemployment that followed the 2008 financial crisis. Even today, the high cost of homeownership and the increase in student loan debt still have many college graduates boomeranging back to their parents.

If you have a child, there's a chance they might come back home after striking out on their own. You may want to think about how you can prepare for this possibility even while your kids are still young. Here are a few savings and wealth management strategies you can take to help your kids launch their adult lives after college.

Set up a trust

Setting up a trust fund is something you can do while your child is still under 18. You can set aside assets for your child to get when they turn a certain age, or you can set up a lifetime trust. This means that the assets are distributed for the life of the beneficiary—in this case, your child.

A lifetime trust can help pay for things like college, healthcare and emergency expenses. It provides some asset protection features that a regular trust doesn't, but it means your child can't get a lump sum of cash whenever they want it.

Start a savings account

Another option is to open up a savings account for your child, either while they're still a kid or while they're in college. Set aside money each month or year in anticipation for extra expenses if your kids need to return home.

If your adult children move back in with you, you might opt to have them pay rent. Meanwhile, you can put that money into that savings account that's been growing for them over the years, so they can take the money with them when they leave.

Look at different savings account options, such as a high-yield account. Try to open one with no minimum balance requirement, low or no fees and a high annual percentage yield.

Create an investment portfolio

If you want to create long-term wealth for your children, think about setting up a brokerage account for them. If they're patient enough to let their money sit for a number of years, they're likely to get a nice return.

There are a lot of different investment options, including stocks, index funds and bonds. There's a level of risk that comes with any investment portfolio, due to the uncertainty of the stock market, but it can be a great way to grow your funds if you invest smartly.

Open a custodial account

A custodial account is similar to a savings account, but it's controlled by the parent and usually is set up while the child is still a minor. It's an easy way to transfer your money to your child and set them up with a nest egg for their future.

The first $2,000 in investment income placed in a custodial account is also tax-deductible, which can lower your household taxes. One thing to keep in mind is that once you transfer the money to the account, that money becomes the property of your child, and you can't take it back.

Make an agreement ahead of time

If you have adult children living at home for a few months or a few years, the more you plan, the better off you'll both be. Try to set up some extra funds to help them out while they work on paying off their student loans or launching their careers.

Having adults living with parents doesn't have to be a financial burden. Above all, set boundaries about finances with your kids. Make sure it's clear what you're paying for and what their responsibilities are. Try to reach an agreement before they move back in, so the experience is good for both of you and not a strain on your finances.


A few financial insights for your life

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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.