Why Spending a Year at Home is a Brilliant Financial Move for Millennials

After graduating from college, society says it is time to get a job, an apartment and start on your way to the American dream. But what if that plan is outdated and a year at home after college makes more sense? The math shows that a year back home makes financial sense and it is losing the stigma it had only a few years ago. Let’s take a look at recent trends and why a year in your childhood bedroom may pay dividends for years to come.

More Millennials Moving Back Home

A recent TD Ameritrade survey found 26 percent of millennials in college plan to move back home when they finish school, according to the Pew Research Center. As of last summer, Americans in the 18-34 age range are more likely to live with their parents than any other living situation. It is the first time in 130 years where this is the case. In fact, America is looking quite a bit more like some other regions around the world where multigenerational families are commonplace.

It used to be the case that moving back home was viewed as a sign of failure and a demonstration of an inability to stand on your own two legs. But as a growing number of individuals see it as a financial necessity, this shift to living at home post-college is becoming widely accepted and more of the social norm in 2017.

Potential Savings from 12 Rent Free Months

Before rejecting the idea of a year at home, consider the financial implications. In addition to savings on rent, you can enjoy other benefits such as meals, saving on utilities and laundry privileges.

The median rent for a 1 bedroom apartment is just over $1,200 per month, according to GoBankingRates. Add in utilities, which average around $150 per month, and you have a $1,350 fixed monthly cost to live away from home. That is $16,200 per year you don’t have to pay by moving back home. Of course, these numbers can change dramatically with location, so take that into account when making any decision.

Advocacy group Young Invincibles found millennials earn 20 percent less than baby boomers despite having better educations. Going up against these odds, it’s no wonder so many young people move back home.

The Crushing Weight of Student Debt

In 2017, the total student loan debt load in the United States passed $1.4 trillion. That is more than $4,300 for every man, woman and child in the United States. But this money is not owed by every man, woman and child. It is owed by 44 million borrowers. The average graduate of the class of 2016 left school with $37,172 in student loans.

The latest data shows more than 70 percent of students graduating from a four-year college has student debt. With so many young people leaving college with massive loans, it is easy to see why many millennials are struggling with their finances.

Scraping together enough cash for rent, utilities, groceries, insurance and gas can be enough of a challenge for a single person. Add in a $351 monthly payment for student loans, the current average payment for borrowers in their 20s according to Student Loan Hero, and it is clear why so many new grads move back home.

If the average grad can save $16,000 per year by living at home, you could pay off your loans completely with the savings from living at home in two years and four months, if you have an average student loan balance. At $351 per month, that payoff takes about 10 years.

Other Perks: Home-Cooked Meals and Free Laundry

There are some bonus benefits of living at home that go beyond saving money. Living at home is both comfortable and convenient. It leads to some good things such as home cooked meals and activities with family and friends.

If you are looking to expand career opportunities, living at home also puts you back in the center of your old network. Who knows, you might even get an interview out of it. Or at least some good career advice from older classmates or friends of your parents who have more experience.

Don’t forget about other ancillary benefits of living at home. You will have access to a laundry room where you don’t have to worry about a neighbor taking out your clothes if you are not there the moment it buzzes. You also don’t have to worry about getting rolls of quarters and can probably “borrow” detergent from your parents.

If you had a strained family relationship through high school, this is a great opportunity to set things right. There is little more important than a strong, healthy relationship with family. Moving back home, you get a second chance at building a fun and loving relationship with parents, siblings and even pets.

Don’t Rush to Say No to a Year at Home

Even though it is fun to continue the independence of college by moving into a new apartment or house, going home makes sense when considering the numbers.

Ideally living at home leads to aggressive debt payments and savings. Whether you are a new graduate or a parent of a student, don’t rush to say no to the year at home. It could be the right formula for long-term financial success.

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