Struggling Kids Put Financial Strain on Families

When their daughter called a couple of years ago, stressed out by her college studies, apartment bills and part-time work, Dan and Lisa Costa welcomed her back into the house with open arms.

Already affected by the recession ? Lisa had been laid off from her job as a public-school teaching assistant, and the building-materials company that employed Dan had been pinched by the housing slump ? the Costas saw it as a way to stabilize the family’s finances when daughter Natalie moved back into their Maitland, Fla., home.

“It just made sense for everyone,” said Dan, 54, a sales-account representative. “We could no longer afford to subsidize her living away from home, and moving back in gave her the opportunity to focus on school better without having all the extra pressure out there.”

Millions of families across the country have faced similar situations in recent years, as adult children returned to the fold amid a tough economy and high unemployment. But though the outcome can be mutually beneficial, as it has been for the Costas, this “boomerang effect” can instead put a severe strain on households already in tough financial straits.

“We are seeing more and more young people, out of work or facing foreclosure, who are moving back in with mom and dad,” said Richard Schram, senior executive at CredAbility in Central Florida, a consumer-credit-counseling agency.

“In many cases, they are bringing a spouse or children with them,” he added, “and that can create quite a stressful dynamic in a household.”

For parents, the financial question usually comes down to this: How far should they go in supporting their adult children during times like these?

“Most people have a heart for their children and want to help them, especially when they are going through tough times,” said Charlie Fitzgerald, a financial planner with Moisand Fitzgerald Tamayo in Maitland. “We have clients who come in and ask us what to do. Some go into their savings. Others will take a sort of ‘tough love’ approach and let their child suffer the consequences of what may have been bad judgment.”

Experts say that, although each family must strike a balance as the parents work out how to support an adult child, there comes a point at which parents must draw a line financially. For example: Never jeopardize future retirement income if the idea of tapping your savings is raised.

“The biggest mistake parents make in these situations is they don’t determine what their limitations are and don’t communicate that to the child,” said Dan Moisand, another principal at Moisand Fitzgerald Tamayo. “If they don’t set those boundaries, there’s little chance the child will follow them.”

Although college students and recent graduates constitute a large part of the boomerang effect, the phenomenon extends far beyond that age group.

For example, the number of people age 25 to 34 moving back in with their parents has skyrocketed since 2003, according to a recent report citing the latest U.S. census data. More than 5.5 million people in that age range were living with their parents last year ? about a 33 percent increase in just seven years, according to the analysis by Tom Lawler, a Washington economist and a former vice president of risk policy for Fannie Mae.

During that same period, homeownership among that age group fell from 43 percent to 39 percent, Lawler found.

And the boomerang effect may last for years because of the housing hangover, he said, despite recent signs of an uptick in employment and the U.S. economy overall.

“We are probably not going to a see a big increase in homeownership for a quite some time among people who are now living at (their parents’) home,” Lawler said. “Even if people find new jobs, they have to be re-employed for a good while, rebuild their savings and their credit, before they can even consider buying a home.”

That means many of current financial arrangements may have to last longer than either side had expected.

Such a prospect doesn’t seem to faze the Costa family, however.

“After calculating all the money I would have saved by staying home, I would have never moved to an apartment (in the first place) when I started college,” said Natalie Costa, 21, who graduated from the University of Central Florida last year. “I was so super-stressed then about my grades. When I called my mom and asked if I could move back in, she said, ‘Of course.’ Then I just had to swallow my pride and come home.”

Now a project coordinator for a Web-design company in Winter Park, Fla., she is working on her master’s degree at nearby Full Sail University. She helps pay for groceries, insurance and other personal and household expenses.

She also played a key role in helping her mother develop new computer skills and online job-search capabilities, according to Lisa Costa, who has since landed a job working with severely disabled students in Orange County Public Schools.

“Of everyone in the family, I was the one most glad that Natalie moved back,” her mother said. “It’s not always easy, but with a lot of understanding and compromise, we make it work.

“You have to give your children their own space, whatever age they are.”

Source: McClatchy-Tribune Information Services.