Category: Personal Finance
One of today’s growing trends is the sharing of a residence by three or more family generations. We generally assume this is a result of pressing financial issues or a need to care for one of the family elders. However, for many, it is a conscious effort to rekindle the family as an institution.
A multigenerational household is defined as three or more generations living together. While such living arrangements have been common among the Asian and Hispanic cultures, only 4% or 4.2 million American households are multigenerational. However, between the years of 1990 and 2000, multigenerational households in the United States grew by 38%. Since 2000, housing preferences lead experts to believe that the trend has accelerated.
Based on the Census 2000, in 65% of multigenerational families, the grandparent was the owner of the residence with children and grandchildren living with them. In one-third of the cases, the house was owned by a child with their parent living with them and their children.
Reasons Multi-generations Live Together
The need for care seems to be a primary driver for multiple generations living together. When an elderly parent needs assistance, it is generally less expensive to have a child as a caregiver versus the cost of an assisted living facility. Sometimes it is the grandchildren who need to be looked after while their parents are working or attending school. This arrangement will generally reduce the need for expensive childcare and allow for the positive influence of a loving grandparent.
Some families see living together as a solution for the high cost of housing. If the residence is suitable for multigenerational living, sharing the cost with at least two of the generations will make such a major purchase more doable.
In addition to economic and care giving reasons, there appears to be a desire to reverse the trend of a scattered family. Much of this change is driven by baby boomers who desire to be involved in the lives of their children and grandchildren rather than being geographically isolated during their retirement years. Regardless of the reason, living with parents or grandchildren can impact the family finances and may require additional planning to achieve a favorable outcome.
If the need arises and a grandparent is suddenly faced with a child and grandchild moving in, there may be issues that will need to be addressed. For example, if the grandparent becomes the responsible person, legal custody may be needed for a grandparent to be able to enroll a grandchild in school or to have the child included on a private medical insurance policy. Likewise, securing public assistance for the grandchild will require maneuvering through a system that generally deals with parents and not the non-custodial grandparent.
If the grandparent lives in a retirement community, maintaining grandchildren in their residence for a long-term period may not be allowed. Or, the residence may not be large enough to allow for comfortable living and will require a move.
Stress on the child giving care to an elderly parent or on grandparents caring for young grandchildren can take a toll on the physical and mental wellbeing of the caregiver. For this reason, if possible, it is advantageous to have options that will allow the primary caregiver to have assistance and/or time away.
If the multigenerational household is the result of three generations desiring to live together versus the financial need to live together, planning will still be required. You will need to determine how expenses will be shared as well as the agreed upon rules regarding privacy and time commitments. Setting guidelines early will avoid bad feelings later. To accommodate the lifestyles of three generation, you may need time to search for a suitable residence.
The home building industry is responding to this trend by designing houses that are more compatible with multigenerational living. Private spaces, acoustics that are conducive to the needs of all generations, easy access and mobility throughout the residence are just a few of the features that are receiving attention.
The once popular “mother-in-law quarters” are returning to the housing market. Such would include two complete living spaces, i.e. kitchen, bedroom/bath, living room, that are included as part of the same house or as a residence with a second detached unit.
Whether a multigenerational household is a result of a “need” or a “want”, to make it work effectively, your personal goals and plans may need to be revised. You will need to review your household income and expenses, the allocation of your investment portfolio, the adequacy of your insurance (life, health, property), as well as secure any necessary legal assistance. Being in control of your finances will reduce at least one of the stresses that can be created by multigenerational living. Understanding your grandchildren’s music may be more challenging!
Elaine E. Bedel, CFP®, is president of Bedel Financial Consulting, Inc., a fee-only wealth management firm providing personal financial planning and investment management services. For more information, visit their website at www.BedelFinancial.com or email to firstname.lastname@example.org.
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