Cause & Effect: Household Numbers on the Rise

It may not be what you think – according to the Census Bureau, the number of individuals and families living together have taken a big jump in the past several years – and it’s not because grandma and grandpa are living with their grandkids.  The report found that 69.2 million, or 30% of families were “doubled-up” (households that include at least one person 18 or older who isn’t enrolled in school and isn’t the householder, spouse or cohabiting partner of the householder) in 2011, up from 61.7 million adults, or 27.7%, in 2007.  The surprising part?  The biggest increase comes from young people, ages 25-34, living with their parents.  Some 5.9 million, or 14.2% of 25-to-34 year olds, lived with their parents in 2011, up from 4.7 million before the recession.

The Cause:  With high unemployment rates, a meek economy and a surplus of students graduating from college with a laundry list of student loans to pay off, it’s not surprising that more and more young adults are living or moving back in with their parents.  What better way to save some money, look for a job and improve their financial standing?  Another interesting cause I read the other day was that unlike the past, many young adults find it quite pleasant to live with their parents these days.  With child-rearing strategies changing, more parents and their children are nurturing lasting relationships together.

The Effect:  The Census Bureau is having a tough time in figuring out the actual poverty rate of the United States: “These young adults who lived with their parents had an official poverty rate of only 8.4%, since the income of their entire family is compared with the poverty threshold,” David Johnson chief of the Housing and Household Economic Statistics Division at the U.S. Census Bureau said. “If their poverty status were determined by their own income, 45.3% would have had income falling below the poverty threshold for a single person under age 65.”

Another effect that affects the economy is a smaller number of households.  A reduced number of overall households leads to a reduction of consumers, including those in the housing market, which puts a huge drag on the economy.  Regardless of the misleading statistics, the biggest impact can be felt much closer to home.  While young adults living with their folks may be reaping the benefits, parents supporting adult children have less money to spend on themselves, not to mention less income to save for retirement.
Some experts say that there is a silver lining.  They believe that these young adults “doubling up” will eventually become financially stable and be able to move out, enter the housing market and start consuming again.  This boost in consumption would lead to an improvement in the broader economy.

Unfortunately, there’s no telling when that will happen, and in the meantime it’s not fair to many retirement-saving parents to allow their children to hurt their futures.  If you’re going to provide a home and various necessities for your post-graduates or financially-unstable children, make sure you set parameters that keep them from getting to comfortable in your house.  Don’t feel bad charging them some sort of rental fee and giving them a timeline in which they must move out or find a job.  Without structure the situation could get worse and put too much pressure on your financial future.

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