Personal finance guru Dave Ramsey has a lot to say about the nearly half of young adults who are still living at home—a level that hasn’t been this high since the Great Depression.
This cohort (those ages 18 to 29) is driving the growth for luxury goods in the U.S., say Morgan Stanley analysts in a December report. The analysis found that living at home freed up older Gen Z’s and younger millennials’ discretionary spending, enabling them to snap up designer handbags and watches. Ramsey, a self-made millionaire and author of numerous personal finance books, blasted the trend on a recent episode of The Ramsey Show.
“So, let me get this straight. You live in your momma’s basement, but you got a Coach purse,” Ramsey said. “Here’s what’s going to happen—you cannot avoid life, it’s coming for your butt. Momma can’t protect you.”
Saying the trend will result in a “train wreck,” Ramsey blames not the young adults but their parents for “out of control” helicopter parenting and “coddling.”
“The problem is you’ve got debt; you’re not earning enough money; and you’re not doing enough to go out and change it,” cohost Jade Warshaw added. “Mom and dad can’t do this for you.”
But the situation is a little more complicated than that. The economy, rather than parenting or lack of willpower, is forcing many young adults to live at home. (The Ramsey team didn’t respond to request for comment.)
Millennials, a highly educated cohort who graduated into the Great Recession and its aftermath, entered a difficult job market while saddled with enormous student loan debt. Many have since been able to make strides in building wealth, but the long act of getting there has prompted them to marry, start a family, and buy a home at a later time than their parents did—if they even partook in these life milestones at all.
“It’s almost like we don’t want millennials to get a piece of the American dream,” André Perry, a senior fellow at the Brookings Institution, told Fortune in November.
Gen Z has also faced its share of financial challenges, the oldest of whom were thrown into a pandemic and dismal labor market at the foot of their careers. While they gained the upper hand at work as the job market bounced back and recession threats motivated them to save more than other generations, many doubt they’ll be able to save enough for retirement and to buy a home.
Both generations are now facing 40-year-high inflation for the first time, with some unable to afford a roof over their head. U.S. rent prices increased so much last year that Americans now have to work six hours more per month to afford it than they did before the pandemic.
Sky-high rent is why 39% of the millennials who moved back in with their parents last year did so, per a survey by PropertyManagement.com. More than half said they boomeranged back home to save more money.
It’s proof that living at home with parents can be financially beneficial. “This should not necessarily be viewed as a negative thing as long as there are clear fiscal goals in place,” Doyle Williams, an executive vice president at Country Financial, said back in 2018, adding that this can help millennials build an emergency fund and save for a down payment.
At the time, the Country Financial Security Index found that 35% of millennials were still living at home with their parents. That stands at one in four today, per the PropertyManagement.com survey. A separate study found that nearly 30% of adult Gen Zers are still living at home with their parents, held back from moving out on their own by the rising cost of living.
Sure, some young adults prefer to treat themselves—after all, Gen Z is motivated by affording material goods more than any other generation and began spending on these high-ticket items earlier on. But if that’s the case for those living at home, that doesn’t mean they’re also not socking money away. It also doesn’t mean that every boomerang kid is splurging on luxury.
Many just hope that living with their parents will help them one day afford what was once more easily attainable for mom and dad.
im in my 40s, and if it was logistically possible, i damn sure would be living with my parents. i know a lot of people about my age who do, and it is the right fiscal move. rents are absolute bullshit. the property ladder has been pulled up so high in most places, someone absolutely needs some kind of monster leg up (like no rent, minimal utilities) + a decent, steady job to scrape together a big enough down payment so they can get into a realistic mortgage on good terms. or at least, that was the case when interest rates were like 3% here for a 30 year fixed. now that they've more than doubled, that amortized interest is fucking heinous and really kicks the borrower in the ass when it comes to building equity in the first 5 years. and what fucking job/career/employer is a safe bet for the 1st decade it will take to be a transferable asset, let alone the 3 decades it will take to payoff?
don't get me wrong, in this bullshit society where housing is an artificially scarce commodity, getting on the property ladder (unless it's some poorly constructed shitheap or you get roped into some predatory loan) is a major step in building equity, but unless you're richie rich, you are not going to be getting into the right kind of loan or house without first being in some kind of no-rent/low-rent arrangement to save up a pile of cash first.
Well said. I'm also one of the millennials who scraped together some property ownership. I lived in one of the most expensive metro areas 2011-2018 (sf bay), but moved in during the 2008-2012 recession, and had rent control; paying $1100 for a one bedroom in the hood. That, combined with sharing all expenses with a partner who works, enabled us to save enough to cut and run and buy in a less expensive area, leaving behind everyone we know for a chance at home ownership
i basically stumbled into a very low rent situation nearly 10 years ago with apparently the one non-evil landlord on the planet, who after 5 years wanted to sell because he didn't want to be a landlord anymore and let me make an offer before he put it on the market [after getting it inspected and having it come back solid]. i didn't want to buy a house, but i sure as shit didn't want a new landlord who i am sure would've instantly doubled the rent. so i forked over a big chunk of my savings and now i'm the weird, older millennial with a little house in a little, quiet neighborhood.
my stomach was in knots for the entire month the process took.
it's literally stupid how lucky with the stars aligning to put me into a stable, cheap housing situation after literally decades of being fleeced by various scumbags. every other landlord i've had should literally be frog marched in front of a crowd, tied to a post, and shot with a snub nose .38 in the stomach.
I'm in my late 20's, and am just about to have my mother in law move in to my appartment, since she is on a fixed income (due to disability) and my wife and I are legit wondering if it will ever be possible for her to have her own place/space ever again, since property prices and rent values in our part of Denmark just never seems to go fucking down.