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The last time that a generation of young adults moving back home was a news story, much mockery ensued.
Remember “failure to launch,” or “boomerang kids?” The cliché of millennials living slothfully in their parents’ basement, most likely binging on video games? It took years for society to accept that moving back home was a response to tough economic conditions that flowed out of the 2008-09 financial crisis, and not a generational failing.
Let’s hope we can be more open-minded in assessing the latest migration of young adults back to the family home, which is happening in response to the economic shocks caused by the pandemic. Perhaps there’s even a case to be made that moving home is the smart move in a tough economy.
Among the first to detect the latest moving-home trend is the credit monitoring company Equifax Inc. EFX-N, which recently singled out young adults as a pocket of financial stress in the economy.
Equifax can identify a multi-generational home by counting the number of people with a credit history at the same household address. The latest numbers tell us that 29.2 per cent of households include adult children living with their parents, up from 26.7 per cent a decade ago. In Ontario, 32.8 per cent of households have multiple generations.
“We’re seeing stress coming in pockets everywhere, but it’s just more prevalent with younger consumers,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. “We think it’s partly to do with things like the higher cost of living. Young people tend to be lower income, and it’s hard to manage through that.”
Ms. Oakes said high levels of immigration mean there are more households where it’s traditional for young adults to live at home until they marry or buy their own home. But she also noted that increases in the number of adult kids living at the family home are happening across the country, even in areas that haven’t seen much impact from new arrivals to Canada.
A sampling of financial stresses weighing on Gen Z and millennials:
- Consumers ages 26 to 35 had the highest rate of missed payments on non-mortgage debt in the second quarter at 1.99 per cent, an increase of 21.6 per cent from the same period of last year.
- The same age group showed a particularly high delinquency rate for vehicle loans and lines of credit.
- Under 35s showed the fastest decline in the amount of money paid monthly on credit cards.
Ms. Oakes said the rising unemployment rate is a particular concern for Gen Z. Canada’s youth unemployment rate hit 14.5 per cent last month, the highest in more than a decade if you discount the pandemic spike. BMO Economics says that’s 2.7 times the unemployment rate for people aged 25 to 54, one of the highest differentials ever recorded.
BMO said that when the weak job market is added to low housing affordability, conditions for young people in the economy are as challenging as they were in the early 1980s and 1990s.
Falling interest rates will help ease today’s financial stress, but Ms. Oakes said the process is gradual and could take 12 to 18 months to reach their full effect. That means more young people will likely be moving home for relief from the high cost of rent, groceries and other living costs, and to help save down payments for home purchases.
Society’s attitude toward moving home is reflected in the title of a book I wrote more than a decade ago called How Not to Move Back in With Your Parents: The Young Person’s Complete Guide to Financial Empowerment. In a recent edition of the Carrick on Money newsletter, I said only half-jokingly that an updated version of the book should be called How to Move Back in With Your Parents.
There just aren’t a lot of levers to work if you’re a Gen Z or millennial dealing with high living costs, particularly now. Those who can slash their living costs have likely done so, and the same applies to finding a cheaper place to live. Next stop, the family home.
Obviously, the option to move home applies to those fortunate enough to have harmonious families and property-owning parents with an extra room. If you’re a financially struggling millennial or Gen Z in this position, float the idea of living at home and propose terms such as paying nominal rent and making other contributions to the household. Parents, you might consider inviting kids who need support to move home for a set period of time.
Living at home used to be the undesirable but practical solution for financially struggling young adults. Now, let’s just say it’s practical.
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