Financial planning advice for the not-so-empty nest

They've studied hard, made the grades, earned the degree and moved ... back home. It is a growing phenomenon among many 20-somethings, and it can change parents' empty nest plans, along with their financial goals.

According to U.S. Census data, the number of young adults achieving typical standards of adulthood, such as leaving home and reaching financial independence, has declined significantly during the past 40 years. Today's so-called "boomerang kids" are those who are returning home after completing school. Twentysomething, Inc., a market research firm, estimates about 65 percent of upcoming college grads expect to return home. The reasons? Dim job prospects, undecided futures and, in some cases, they are simply in no rush to grow up.

Another person at home can put a strain on a budget, especially when most parents of adult-age children are trying to save for retirement. So how do you cope financially? First, it is important to establish some type of living agreement. One idea is to charge rent, with the amount being equal to what your child would pay elsewhere, or what you think living at your house is worth. You can use the money to cover your child's living expenses, and perhaps invest any leftover amount for your son or daughter without telling them. This way, when your child moves out, you can give her the money you've invested as a moving-out gift. On the other hand, if you know your child is diligently saving money in hopes of moving out, you may decide to forgo rent, but ask that she contribute to other household expenses, such as food, phone and cable bills.

Many 20-somethings returning home after college also find themselves in debt, whether it's from student loans, credit cards, or both. As a parent, you can help your children learn how to deal with financial situations they haven't dealt with yet on their own. Talk to them about consolidating student loans at a lower rate. And rather than paying off their credit card debt for them, help your children figure out a manageable payment schedule.

Health insurance is likely another area where your child will need guidance. If your child does not have a job yet, or is unable to get medical coverage through work, you can help shop around for an individual policy. Talk about the process, and explain how filing claims works. Remember - if your child is uninsured and faces a medical emergency, you may end up using your own savings to foot the bill.

As a parent with a boomerang kid, you may also want to look at ways to save yourself money. For example, having a child at home again could get you some help from Uncle Sam. Consult your tax adviser to see if you qualify for certain tax breaks you weren't eligible for in the past. Depending on your circumstances, you may be able to save money by filing as head of household or claiming your child as a dependent.

Establishing a plan with your boomerang child will not only help you protect your future financial plans, but also prepare your son or daughter for financial independence.

This article is provided by Lee C. Eisinberg, a financial consultant at RBC Dain Rauscher in Phoenix, and was prepared by or in cooperation with RBC Dain Rauscher. Call 602-508-7863 or e-mail lee.eisinberg@rbcdain.com.

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