4 Reasons Why Millennials Are Still Living With Ma and Pa

In the midst of the 2008-2009 Recession, Millennials (as well as the rest of us) were freaked out about where the economy was headed. Understandably, there was a big spike of Millennials who stayed put in their family residence with “ma and pa”. In fact, an earlier Struming, Millennials Living with Ma and Pa, looked at this trend. Fast forward to 2015 when the economy is far stronger, unemployment among Millennials is far less, but the trend of living home has not reversed and is getting stronger.

The data is powerful and tells that an underlying attitudinal change exists among Millennials living at home rather than in their own residence. The recent Pew Research Report, More Millennials Living With Family, has been looking at trends since 2007. The most recent 2015 report, just published in July, tells an interesting story.

A few important underlying economic factoids:

ST_2015-07-29_young-adult-living-071. As shown, unemployment is way down among Millennials—it peaked at 12.4% in 2010 and is down to 7.7%, a drop of almost 5 points, so surely more can afford to live away from home, if they chose to.

2. In an improving economy, weekly median earnings have increased, albeit modestly

But there’s no impact on the trend of Millennials living at home. In fact in 2010, at the height of the Recession and Millennial unemployment, 69% lived independently – while in 2015, with unemployment almost 5 points less, fewer Millennials live independently, just 67%. So we’re going in reverse. This trend is true whether one attended some/graduated high school, attend some/graduated from college. The slope is downward in all cases.

The question is why? The answers are not quite as easy to understand. Here are my hypotheses:

1. College debt–Among those who attended college, the size of debt has been increasing rapidly and on average now approaches $30,000 for a recent grad. That’s a heavy load, particularly for a 22 year old with a modestly paying entry-level position. This makes the idea of living at home for a few years more palatable.

2. Value changes—This trend cuts across all Millennials. Today, it’s far less of a no-no among your peers to live with your folks. Years ago, getting married young and leaving the “coop” was what 20 somethings would do. That’s no longer the case. Marriage is happening far later (if at all) and the desire to live independently is not nearly as strong. (Latest Data About Millennials)

3. Less rent, more pocket money—This one is pretty basic. If living at home with the folks is not a biggy to you, it’s surely a way to have more “disposable” income.

4. Savings—Millennials are starting to get the idea of the power compounded savings (A Penny Saved is 7 Pennies Earned). A lot more savings can be generated if there’s no rent to be paid.

The trend to stay at home obviously has a negative impact on businesses tied to household formation like furnishings, cable TV, etc., so there’s a still negative macroeconomic effect caused by this phenomenon. But for a wise Millennial cautiously looking to build wealth over time, a few early years with ma and pa is not such a bad idea after all.

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