More adult kids are moving back home. How to make it work.

Sharing finances with grown adults and protecting financial boundaries can be tricky.

A survey by financial advice firm Thrivent this year found that 46% of parents have had their adult kids back home to live with them at some point, and that more than a third of them found it harder to save for long-term goals like retirement as a result.

A whopping 38% said they were struggling to pay off debt, up from 23% the previous year.

Financial advisors suggest rules that can establish healthy boundaries when adult children are living at home.

Before moving in, it’s good to have kids explain their goals and set out clear targets that parents can check in on, said Lili Vasileff, president of Connecticut-based Wealth Protection Management.

Whether it’s saving to get on the housing ladder or to rent a place of their own, or searching for a new job, children should have a plan when they move back home and know when they expect to reach financial independence and move out again.

Regular communication with the children is key to avoiding resentment or misunderstanding, making sure that the stay is for a limited period and that it doesn’t lead to financial dependence, she said.

“You want to have early conversations and often to avoid friction," she said.

Vasileff highlighted that sometimes bringing in a third party can help facilitate these conversations and ensure financial check-ins are done properly.

“What becomes an issue often is not so much the money as it is the discipline," she said.

If parents are trying to motivate their children to become more financially independent, setting a date when rent is due can help, said Dustin Smith, financial advisor at Minnesota-based company Wealth Enhancement.

If money is an issue, then rent can be paid with home labor, such as shopping, cleaning or yardwork.

“Every situation is different, and these things rarely go as expected, but setting appropriate guidelines and sticking to them as much as you can can really help reach the ideal result for everyone involved," he said.

That’s an opinion Bobbi Rebell, financial planner and financial expert at consumer site CardRates, shares. She says that even if parents have plenty of money, they shouldn’t pay for everything, as that discourages children from taking charge of their own finances.

“Being somewhat self-sufficient, even if living at home, can give a young adult confidence in their ability to be a financial grown-up and move toward more independence," she said.

Rebell suggests steps like auto-transfer of money owed and putting bills in kids’ names, to set up a routine and encourage accountability.

That extra cash can always be put in an emergency fund that kids can access at a later date.

Protecting parents’ financial health is also a priority, she said.

Dipping into retirement savings to fund kids’ expenses should be avoided at all costs, she said.

“Think of it this way: Would you ever want to ask your kids for money as you age because you depleted your retirement money helping them?" she said, “That’s not good."

Instead, parents should take stock of their own financial needs and make sure those are covered before deploying funds to children. They should also be transparent about what they can and can’t afford, she said.

“Be candid with your kids who may not realize this is a financial stretch for you," she said.

Another approach is to consider financial support to a child as an advance against parents’ estate, Vasileff said.

“Parents can figure out if the advance is to be recouped, if it’s to come out of the estate or if it’s to be forgiven," she said, “All these conversations are important."

Setting these kinds of rules can also help separate the personal from the financial, an issue parents often struggle with, said Lauren Lindsay, financial advisor at Tennessee-based wealth management firm Paragon.

She has found parents feel responsible for their children’s struggles and want to help no matter what. That often means putting their own financial futures at risk and in the long-term endangering the whole family’s, she said.

She cited a client who paid for a house of a child divorcing, only to do the same thing two more times when the other two kids divorced as well.

“In my experience the free ride never ends," she said.

Lindsay advises instead to set clear boundaries and try to keep emotions out of it.

Approaching kids’ financial situations with a bit more apathy and letting them take charge of their money problems can benefit the child in the long term, she said.

Clearly defining the expenses the child must contribute to when they move back home and being strict about when they should move out all contribute to healthy outcomes, she said.

Finally, couples need to consider the strains a child moving back could put on their own relationship and regularly talk to each other about it to make sure they are still on the same page.

“Realistically, parents decide to put their own relationship to the test." she said. “Open and regular conversations are paramount to protect the child as well as the couple," she said.

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