Rents are rising at the fastest rate in decades, and housing prices are also rising. It’s time to embrace the economic truth that living independently at an early age can get in the way of achieving true financial security.
The pace of inflation slows slightly in April but remains at its highest level in 40 years
Naturally, not everyone can live at home. They have moved for a job, or the situation at home is too toxic or overcrowded. But if you want space and sanity, consider the savings young adults could amass if they continued to live in the family home.
With inflation at its highest in 40 years, it makes economic sense for adult children to live at home for several years.
Overall, prices rose 8.3% in April from a year ago, according to the Bureau of Labor Statistics’ latest consumer price index summary.
The cost of housing is a major driver of rising inflation.
Rent is averaging $1,927 in more than 100 major metropolitan areas, an increase of $323, or 20%, since the start of the pandemic, according to a rent index produced by Zillow. Of course, depending on the location, the monthly cost can be considerably higher. The average rent in April was around $3,000 in New York and over $2,800 in Miami. In Charlotte, it was around $1,700.
Rents rose last year more than any year on record, according to Zillow. Strong demand for rental housing is keeping vacancy rates at historically low levels, pushing up rental prices.
For millions of Americans, price hikes are inevitable. Here’s why.
The pandemic has pushed millions of Americans to move in with family members, according to the Pew Research Center. But now that coronavirus cases have declined and businesses have resumed normal operations, many people want to live on their own. After all, we’ve been conditioned to think you’re not a real adult until you have your own place.
Living alone is considered a sign of economic maturity.
But the high cost of housing makes it nearly impossible for many young adults to build up a cushion to deal with a financial emergency. Their housing expenses can prevent them from paying off their student loans quickly. Exorbitant rents can prevent them from starting to save for retirement. And we know that the power of compound interest favors young people.
People keep asking me what I recommend for people struggling with rising inflation. The answer for many is to do what they can to reduce the biggest expense in their budget, and that is housing. It may mean that you cannot afford to live alone.
Pew looked at census data from 1971 to 2021 and found that the number of people living in multigenerational family households had quadrupled.
When asked why they share their homes with relatives, Americans often say it’s because of finances or family caregiving, according to Pew.
Among adults ages 25 to 29, nearly a third live in multigenerational households, often in their parents’ homes, according to Pew. Nearly 4 in 10 young men live in multigenerational households.
And while a quarter of adults living in multigenerational homes say it’s stressful all the time or most of the time, more than double say it’s mostly or always rewarding, Pew found.
I feel for the men who are ridiculed for still living at home – and for the girls who feel compelled to leave.
My husband and I took a different approach with our children. We begged them to live at home. We want them here at least until they’re 30. Listen to me before you pretend we’re just pampering them.
One year after earning her master’s degree and interning in texas, our eldest moved away and saves the vast majority of her annual income. At 27, she spends 15% of her gross salary on her 401(k). She is saving to pay cash for an electric vehicle in about three years.
Our son graduated from college last year and still lives at home. He works two part-time jobs while studying to enter the actuarial field. We are in no rush to see him go. He’s fun to be around – plus he’s the main dog walker.
My husband and I have agreed not to charge our children any rent as long as they save up, so that when they finally get going, they’ll have a substantial cushion that should keep them from boomeranging home.
Financial independence doesn’t have to come with a monthly rent payment. This can be measured by how well people under your roof manage their money within their means.
We should champion long-term multi-generational housing as a way to not only fight inflation now, but also help younger generations build wealth that will help them weather the financial storms to come.
Mortgage rates rise, but hot housing market slow to cool
It’s not a sign of developmental stunted living in your parents’ house if you’re a productive young adult trying to save money or pay off debt, or both.
It’s a smart move when a rental can eat up so much of your take home pay. Let your adult children eliminate the heaviest burden from their budget. They will have plenty of time to manage their own household.
A decade at home from their twenties and saving most of their income rather than paying rent for all those years could put young adults on the path to homeownership it could end with a small mortgage or no mortgage at all. It would be a financial game changer.