There have been many statistics published in the news about how more and more millennial adults are still living with their parents. More so than previous generations. As this is an investing and personal finance blog, I would like to focus on the merits (or not) of this strategy in order to save money early on in your career.
Is this a smart financial move? Or does it turn you into a loser?
Just to be clear, when I talk about living with parents, I am not talking about someone who's living out the stereotype of the "basement dweller," that is, someone unemployed, with questionable hygiene/grooming habits, who sits around all day playing video games.
Nor am I referring to someone who has to live with family for health reasons (either their own or that of their parents'), or something similar outside of his or her control.
What I am referring to is someone who is gainfully employed and chooses to continue living with his or her family so that he or she can save money.
Strictly speaking, in terms of dollars and cents, living with your parents is a great idea. You can save a lot of money by eliminating or reducing housing costs. All that money you are not paying some landlord in rent can go straight to your savings or to pay down student loans if you have any. If your goal is financial independence, this will give you a big head start.
However, not everything is about dollars and cents.
Living with your parents as an adult will cost more than you think... what you save in money, you lose in personal development and maturity.
Imagine someone in their thirties with a high paying job and over $500K+ in the bank. Sounds great, right? Now what if I told you that he lives in the same room he did when he was 12, and that his mother does his laundry and cooks all his meals. You would say that this is not an adult, but a thirty year old child.
If this is you, how do you expect to be the head of your own family (wife/husband + kids) if you haven't yet proven that you are capable of taking care of yourself? Are you expecting your spouse to take over for your mother?
What I said is pretty harsh so please do not take offense if this is you, because at one point this was me. I "overstayed my welcome" in order to save money. When I finally did leave, I wondered why I didn't do it sooner.
When is living with family OK?
To be clear, I am not at all against living with family to save money. I very much support it (to a limit), especially if you live in a high cost of living area.
If you or your children are going to college, it is worth considering the option of them continuing to live with their parents (as opposed to dorming) in order to save thousands of dollars. This could mean the difference between having to take out student loans and graduating debt free. It's better to start out with a $0 net worth upon graduation than to be down $50K. I was a "commuter student" at a local school, living with my parents, and don't regret it at all. Then again, I don't drink and never really understood the appeal of the "college experience". There are also plenty of community colleges without dorms where everyone commutes.
After graduation, someone living with their parents for a few years in a high cost of living area such as New York or San Francisco, holding down a decent job, can really jump start the progress on their net worth.
There is a limit to this.
Living with parents is like one of those parabolic graphs that slopes up, evens out, and then slopes down (the law of diminishing returns is one example). Benefit is on the Y (vertical) axis and Time is on the X (horizontal). As you get older, the extra money you save increases your Benefit. However, the more time you spend there, the more the developmental costs take over and drag everything down. This point is probably different for each person. Some cultures are more accepting of adults living with parents than others.
Living with family to save money is fine. Just don't get caught out on the right side of the graph.