Bundling expenses can be an effective strategy to lower costs, and one way to do it is by forming multigenerational households. When several adults are earning and living as one, they can economize and save.
It’s becoming more common, too, especially as inflation pushes the cost of goods and services higher. A Pew Research study found that households comprised of two or more adult generations have increased over the past few decades, and by 2021, 31% of young adults without a college degree were living in one.
Financial pressures are the primary driver for multigenerational living, but there are plenty of other reasons to live with close relatives. Not only does it enable everyone to share bills and tasks, energetic young grandparents can enjoy and care for their grandchildren and the whole family can get closer.
The Microeconomics of Multigenerational Living
According to the U.S. Bureau of Labor Statistics, food and housing spending increased in the April to June 2022 quarter compared to a year earlier. Food expenditures were up 10.8% and housing rose by 6.1%. The financial stress was intense for many families.
For this reason, Americans have been exploring creative ways to cut back, Rod Griffin, senior director of consumer education and advocacy with credit bureau Experian, says. That includes a move toward multigenerational households.
“A recent Experian survey shows that 66% of Americans are actively looking for ways to trim expenses from their monthly budget,” Griffin says.
“Nearly two out of three of those surveyed say even an extra $50 dollars per month would help relieve their financial stress. We believe these survey findings align with the trend of some parents choosing to move in with their adult children as consumers everywhere are looking for more ways to keep money in their pockets,” he adds.
Although $50 a month may not seem significant, Griffin points out that it can be the equivalent of a utility bill, internet service or tank of gas. And that can make a substantial difference when cash is tight.
Bruce Newbeck, a San Bruno, California-based small business owner, moved in with his oldest daughter, now 32, four years ago.
“We said, ‘We can do this separately or do this together,'” Newbeck says.
They chose the latter and have since expanded the living arrangement to include his middle son, age 25, youngest daughter, age 19 and two of his 10-year-old granddaughters.
“This is cheaper for all of us. We delegate different tasks. You get the phone bill, you get the water,” Newbeck says.
[Read: How to Make a Budget — and Stick to It.]
Working Together to Fix Problems and Accelerate Debt Repayment
Sharing costs can also help at least one member of the family reduce their financial obligations so they can get back on their feet.
“After my mother lost her job about three years ago, it became difficult to continue with her monthly mortgage payments,” Rinal Patel, co-founder of We Buy PhillyHome, says.
“Although I was able to assist a few times, we had to come up with a lasting solution. We realized that in addition to all the other benefits of this arrangement, it also helped minimize the costs of maintaining two different houses,” she adds.
Having her mom move in gave them the opportunity to get the loan back on track and even pay off the mortgage at a faster pace.
[Related:14 Easy Ways to Pay Off Debt]
“Seeing as I had an extra room to spare, we thought it convenient and reasonable to have my mother move in for some years while we rented out her house,” Patel says. “The rent money has been dedicated solely to quickly paying off her loan.”
Beware the Risks of Merging Accounts
Griffin agrees that when two or more adult family members of different generations live together, there can be more funds available for expenses as well as debt repayment but cautions against combining credit accounts.
Keeping separate loans and credit cards rather than co-signing is best, whether you share the same address or not.
“You need to be very careful about merging finances with family members,” Griffin says. “Especially credit. There is an upside of using credit cards together when you manage them well. As long as you keep the balances down it can save you money, get discounts on purchases, rack up airline miles.”
When you share an account, however, and someone isn’t managing it correctly, it will hurt the credit reports and scores of everyone on the account.
Even when bills are in individual names, you must establish money management rules. If the person who was designated to pay the utility bills falls behind, everyone will suffer when the power goes out.
[READ: How to Remove Yourself as a Co-Signer on a Loan]
Benefits Beyond Money
“For me, generational living helps me understand the younger generation,” Newbeck says. “Because we all live together, I learn the words of my kids’ and grandkids’ generations, the themes of what’s going on in their lives. I get to know their peers. I learn from them. I love it, and look forward to coming home from work every day to see everyone and talk about what we’re going to have for dinner.”
The experience has also been positive for Newbeck’s children and grandchildren. They all help each other and have become closer as a family.
Prepare for Conflict
That said, conflict can arise when generations clash, so prepare.
Kahlil Dumas, money expert and founder and CEO at UNSTUCKKD, emphasizes the need to communicate — and understand that each age group has a different way of not just spending and saving, but living.
“For young adults, the prospect of moving out on your own can be daunting, especially given the high cost of living and the student loan debt crisis,” Dumas says. “Multigenerational living can offer a more affordable alternative, allowing you to save on living expenses while also enjoying the benefits of living with family.”
Though people of various ages living under one roof can be a fantastic way to come together and save on living expenses, it’s important to acknowledge that each generation has its own needs and preferences.
“For instance, baby boomers may value having their own space and privacy, while millennials and Gen Zers may be more comfortable with communal living spaces,” Dumas says. “In order for multigenerational living to work, we need to take the time to understand and appreciate the nuances of our family.”
Multigenerational Households Can Learn From Multicultural Communities
Dan Hattori, CEO of the financial services company AdvisorCheck, emphasizes that parents moving in with their children and vice versa may still seem foreign to some in the United States but is the norm in many parts of the world.
“Multigenerational living is very common in Asia,” Hattori says. “Wherever there is a high cost of living, it’s a big advantage. When you are all sharing resources, it can reduce a lot of stress.”
In fact, Hattori says, when younger parents live with their young adult kids, that next generation can save enough to start families of their own. By pooling funds and bundling expenses — while taking steps to ensure respecting generational and financial habit differences — the entire household can run more efficiently.
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Younger Parents Are Moving In With Kids: Here’s Why originally appeared on usnews.com
