College graduation season is here and you know what that means. You have to give up your mancave, junior is moving back home! Boomerang kids are returning home to save money.
Here is a simple idea which will:
1) Allow you to steal a little extra time with your grad before they leave the nest for good
2) Teach your grad to establish a habit of monthly money communication
3) Establish a strategy for your grad to accumulate cash for their own place
Treat the arrangement like a practice run for “the real world” with parents playing the part of the landlord and the grad playing the part of the tenant. On the first of each month the grad pays “rent” to the parents. The parents deposit the “rent” to a savings account for the grad to later use to get their own place.
In the beginning this is about establishing the monthly habits of talking about money with the important people in their life and paying rent, even if the amount is minimal. Then, when the grad has a job, the “rent” should increase making sure it remains affordable. The goals is to eventually get the monthly “rent” up to an amount that is equal to the amount that the grad will be paying once they are out on their own. Do some online research to see what local apartments cost, preferably with roommates.
Agree in advance on a term for the “lease.” Will it be for six months? A year? By the time the “lease” is up on the grad’s childhood bedroom, they should be well on their way to having established a nest egg for a deposit on an apartment and first and last months’ rent. Consider extending the “lease” so they can set aside enough for an emergency fund of six months’ living expenses to set them on a firm foundation.
If you have an especially responsible young adult, let them handle the monthly deposit into the savings account. The real key is to pull out the bank statements and have the monthly discussion about savings and bill-paying. This will establish the habit for future money conversations with roommates and more importantly, one day, a spouse. Savings in the bank and a monthly habit of open communication about money; what a great graduation gift!