Moving Back With Parents Takes Planning

For this week's magazine, I wrote about retired parents who provide financial support to their adult children. It's a pretty common phenomenon, with about 4 in 10 adults age 60 or older giving money to their kids. In addition to assisting with cash, some parents let their grown children live with them or offer free baby-sitting. Many of the 20- and 30-something "children" I spoke with said they couldn't make ends meet without the help.

I know where they're coming from. After I finished graduate school, I moved back home with my parents for just over a year. I paid them $400 a month in rent, but it was nothing compared with what I was getting in return: a fridge filled with food, a warm house, plus parents who would hang out with me when I wanted. (By my mid-20s, I was old enough to appreciate their company again.) If I had had to get an apartment, it would have cost me at least $1,000 a month.

One of the secrets to our successful arrangement was that all of the financial details were worked out in writing. Each month, I would fill in the rent I owed them on an Excel spreadsheet and write them a check. The amount had been determined by mutual agreement before I moved back home. The fact that everything was out in the open made it easier when my younger sister moved back home, too. She paid the exact same amount each month, which felt fair to both of us.

Whether grown kids should pay their parents rent at all is debatable. Some parents say that would defeat the purpose of letting their kids move in with them; they want them to save all of the money they can for a house of their own. Other parents collect rent from their children only to give it all back to them when they move out, so they have a sizable nest egg.

In my case, both my sister and I had steady jobs. We could afford to pay the rent, and it seemed only fair, since we were at least doubling our parents' grocery bill. I was still able to save more money than I would have otherwise. And perhaps most important, paying rent made me feel like an adult, when it would have been easy to revert to feeling like a high schooler again. I was, after all, a 25-year-old sleeping in her childhood bed.

Do you have a story about living with your parents or letting your grown kids move back in with you? What worked—or didn't—for you?

• Meanwhile, check out this week's Carnival of Personal Finance for tips on retirement planning, budgeting, and shopping frugally this season.