When adult children live in your house

Whose living are you paying for? Roughly 62 percent of people age 50 and up are providing financial support to family members, according to a study by Merrill Lynch Wealth Management. Some are helping out with the needs of their elderly relatives, but for many, their adult children have moved home — or never left.

Whether the support is a one-time need or ongoing over many years, the baby boomers who are shelling out money do so without realizing they’re putting their own retirement security at risk. After all, even people who earn plenty have been operating on a thinner margin for the last several years.

This is a problem that has grown to the point that self-help books are popping up, to advise people how to deal with it, like this one: The Bank of Mom and Dad: Money, Parents and Grown Children, by Derrick Penner. Penner believes parents let kids live at home because they feel guilty and can’t say no, but, he says, it’s time to get a little “hard-nosed.” After all, parents have far fewer earning years left till they need to rely mostly on what they’ve saved. The kids, on the other hand, have decades to earn and sock away money.

“I wrote the book to give those considering lending or giving money to their children some things to think about,” said Penner. He recommends that before you “open the bank,” do a careful assessment of your financial situation. Then sit down with your kids in a calm and honest discussion and require them to bare their financial souls to you. Are they running up credit cards for non-necessities? How do they define necessities?

One disabled senior lives on a fixed income. Yet two of his adult children regularly tap the “bank of Dad,” without regard for his own financial situation. Then again, he’s never told them they’re hurting his pocketbook. His 37-year-old daughter asks for money nearly every month, to “scrape up the rent,” she tells him. But her Facebook page shows her making the rounds of restaurants, movies and bars on the weekends. He’s a nice man, but don’t feel sorry for him, because he needs to have the discussion that Penner recommends.

Penner also tells parents not to succumb to guilt or those sad faces asking for another loan or gift of money. “Know your assets, do a proper balance sheet. If the numbers don’t allow it, don’t do it.”

He also says, if your kids ask for a loan, treat it seriously. Not a “loan... wink, wink,” as in “you’ll never see that money again.” Put the loan in writing. Set up a payment amount and due date. That, he says, creates a firmer sense of obligation.

Then expect them to make the payments. If you look the other way when they don’t pay, you may as well call it a gift.

When kids move home … or fail to move out

When kids are born we parents think we’ll be supporting them for 18 years, maybe more if they go to college. But in 2014 the U.S. Census Bureau reported that 15 percent or more of adult children ages 25 to 34 are still living at home, or have returned. Depending on which study you read, that could be because of delayed marriage or a failed marriage, a weak economy, student loan debt – the reasons vary.

The question is, if your adult kids live in your house, should you charge them rent? The “My Money” column in U.S. New & World Report (USNWR), along with many others, says a resounding yes.

Many college graduates complete a degree, maybe several degrees, but don’t feel the need to leave home. Why bother? Even if they can find a good job these days, living on your dime lets them drive nicer cars, wear more expensive clothes, and blow more money on entertainment and eating out. Plus you may do their cooking and the laundry, for free. Where else can they get a deal like that?

It could be that your kids have left home and later suffered a significant loss, like a spouse, a job, or had a house foreclosed. There’s no shame in needing to regroup, for a time. But there’s also no reason why a healthy adult shouldn’t be contributing financially to make the household run.

How much should you charge? The “My Money” column suggests a nominal amount of $100 or $150 per month, rather than demanding the fair market value of an apartment (unless of course you really need more).

But make sure the kids know it’s not optional or you’ll never get it. Of course, the point isn’t that you need the money – though you may. The point is to keep them accountable, make them budget their money, and be aware of the expenses of a household.

Can’t bring yourself to charge rent?

Some parents don’t feel right about charging rent. For them, “My Money” suggests making the kids responsible to pay for groceries, or for the electric bill or some other regular expense. If you’re determined not to charge rent of any kind, consider setting up some regular chores and expect the kids to take care of them.

Allowing them to live without requiring them to contribute to the running of the household, financially or at the very least with significant chores, is not doing them a favor. It’s enabling poor habits and draining your retirement. Living at home for free bears no resemblance to the real world and may undermine your child’s ability to ever stand up to adult responsibilities. For their sakes and for your sanity and financial well being, reconsider the free rent.

Nobody said it would be easy.