Submitted. Increasing debt levels, a stagnant job market and high housing costs are driving a growing number of twenty- and thirty-somethings back to the family home. But it’s not all gloom-and-doom—there’s an upside for this so-called Boomerang generation.
According to some of the most recent research, today’s young people are facing an uphill battle when it comes to establishing financial independence. A recent Pew Research Center study in the U.S. found that two-thirds of recent grads with bachelor’s degrees are saddled with an average student loan debt of about $27,000. Twenty years ago, only half of recent graduates had student debt—and much less, at an average of $15,000. The financial burden on Millennials is greater than it was for preceding generations, although they still crave the comparative financial independence they saw their parents enjoy.
“The stigma attached to living with your parents seems to be retreating in the face of today’s economic realities,” says Michelle van Bakel, an assistant branch manager with Envision Financial. “People have realized the economic challenges of the last few years aren’t going to disappear overnight.”
To cope with the economic challenges, more and more young adults are heading back to the financial security of the family home.
“Living with mom and dad reduces the financial burden that young adults feel and with that comes the chance to make progress on financial goals,” van Bakel says. “It’s an opportunity to get back to the basics of personal finance—saving, investing and paying off debt. These all help establish a financial foundation and young adults can make the most of the time under decreased financial pressure to improve their financial position using these time-tested disciplines.”
Though it may sound contradictory, using credit is also part of the equation in improving one’s financial position.
“When used responsibly, credit is an essential tool for young adults,” says van Bakel. “A good credit score helps with things like renting an apartment, purchasing your first car, aiding in job applications, or qualifying for a first mortgage. But we find that some students fear using credit. The risk of racking up unnecessary debt is a concern, so avoiding credit altogether sounds reasonable to them. The real problem is abuse of credit. A better approach is establish—or maintain—a good credit score by setting up a low limit credit card and using it only for small cost items you know you have the funds to pay off in the short term.”
“I also encourage all of my members to work with a financial professional to create a financial plan,regardless of their age and financial position,” says van Bakel. “Having a plan provides focus and a goal and you can review it periodically to make sure you’re on the right track. Many financial services providers offer this service free of charge—take advantage of it.”