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If you’ve graduated from high school or college and are still living at home, you’re not alone. A recent Bankrate study found that 24 percent of Gen Zers (ages 18 to 26) are living rent-free with parents, friends or guardians. Meanwhile, around 16 percent of those between 25 and 34 years old live with their parents, according to the U.S. Census Bureau.
The stats shouldn’t come as too much of a surprise. Nearly two-thirds (64 percent) of millennials and 55 percent of Gen Zers said they delayed a financial milestone due to the state of the economy in a 2022 Bankrate poll. Plus, they’re faced with crippling student debt.
Still, this doesn’t mean the outlook is hopeless. It just means that for young Americans to overcome these hurdles and strike out on their own (either by renting solo or buying a home), saving, investing and budgeting will be key. Do you want to make the dream of moving out of your parents’ home a reality? Consider this your guidebook.
- Of U.S. parents with children over the age of 18, 68 percent say they’ve made a financial sacrifice to help their adult children with money. (Bankrate)
- Of Gen Z, 30 percent rent from a landlord, while 39 percent of millennials rent from a landlord. (Bankrate)
- Most young adults (62 percent of young millennials and 63 percent of Gen Z) say homeownership is part of their American dream, yet 73 percent of all aspiring homeowners say they can’t afford it. (Bankrate)
- About a quarter (26 percent) of millennials said they delayed buying a house due to economic concerns. (Bankrate)
- Many young adults are crippled by student debt: Those ages 25 to 34 have about $482.4 billion in student loan debt, and adults under 24 — many of whom are still in college — already have $104.2 billion in student loan debt. (Studentaid.gov)
- While the portion of young adults (ages 18 to 29) living with their parents peaked at 52 percent during the height of the pandemic, data from a year later showed that about a third (33 percent) of young adults ages 18 to 34 still were living with parents. (Pew Research Center)
Starting to save for your own place
Whether you aim to buy a home or rent an apartment, you’ll need a healthy amount of savings to make it happen. Rentals come with deposits, fees and other expenses, while buying a home requires a hefty down payment plus closing costs.
If you’re looking to own a home rather than rent from a landlord, anticipate saving a bit more. While median monthly rent as of 2021 was $1,163, the median monthly cost of homeownership with a mortgage was $1,697 — over $6,400 more a year — according to the Bureau of Labor Statistics.
To meet your savings goals, begin by paying down any existing debts. Since you’re living at home and likely have fewer expenses, try to funnel a good chunk of your current income toward paying off student loans and any other high-interest debts while there. The quicker you can pay down these balances, the easier and faster you’ll be able to save for your own place. As a nice little bonus, paying down these debts can also help your credit score — which can help with both a rental application and a mortgage loan.
Here’s how to kickstart your savings:
1. Open a savings account
First and foremost, you’ll want a high-yielding savings account, as this will earn you more on what you save. Current savings rates are high, at around 5 percent in some cases, which provides an excellent opportunity to maximize your earnings. Compare different banks and credit unions to find the best rates available. Online institutions often offer more competitive rates compared to traditional, brick-and-mortar banks.
When you’re just starting out, it’s also important to choose a no-minimum-balance account, such as the American Express banking and savings program. This will allow you to start saving (and earning) immediately, as well as avoid fees should your balance drop below a certain point.
2. Create a personal budget
Minimizing your expenditures will free up more cash to put toward savings. As a general rule, commit to never spending more than you make (this will only result in more debt), and start creating budgets for individual expenses. Budgeting apps like You Need a Budget or Mint can help. You can also use one of the many automatic savings apps out there, like Chime, Qapital, Digit and Acorns. Acorns can even help you make money on those savings by investing it in various portfolios.
Make sure you know how much you need to save, too, as this will help you budget your funds and determine a timeline for your goals. This savings calculator can help you pinpoint exactly how much you should save daily and monthly in order to make your move a reality.
3. Build up your credit
Regardless of whether you’ll be buying or renting, your credit will play a role in your move — as well as how much it will cost you. If you want to have your pick of properties and minimize your costs, having a prime credit score can help.
Credit scores are determined by a number of factors related to loans and credit, including payment history, utilization of credit, credit history and new credit inquiries.
Paying off your debts will give your credit score a nice boost, but there are other ways you can improve that number as well:
- Get a credit card (if you don’t already have one), and maintain a low balance so you can keep your credit utilization ratio low. Commit to paying it off in full and on time every month.
- Become an authorized user on your parents’ account or the account of someone else with an established credit history.
- Pull your credit report from Experian, TransUnion or Equifax, just to be safe. If there are any errors or inaccuracies, report them and have them addressed. It could mean a serious boost in score once corrected.
Remember, once you’ve paid an account balance off, don’t close it out. Credit history is a big factor in your score, so keeping these older accounts on your record is crucial.
Saving up to rent
If you’re looking to get out of the house ASAP, renting is your best option. It’s also the more common option: 39 percent of millennials are renting, compared with 24 percent who live in a home with a mortgage, according to Bankrate data.
Not only are the upfront costs much smaller, but so are utilities and other associated expenses. In many apartments and rentals, water, electricity, gas and other services are even included in the rent, making it even easier to budget and save up.
To start saving for your future rental, research rent costs in your area. As a general rule, you don’t want your rent to cost any more than 30 percent of your monthly take-home pay. Once you’ve determined what your rent will be, add another 30 percent to that to account for living expenses. This will include things like:
- Renter’s insurance
- Internet service
You should also see whether the rental units you’re considering will require a deposit. Many landlords ask for security deposits and first and last months’ rent. There may also be a pet deposit, if you’re bringing a furry friend. There are also moving costs to consider: packing materials, moving truck rentals or moving company fees.
Use a spreadsheet to tally up all these expenses and determine:
1) what your move will cost you upfront and
2) what the rental will cost on a monthly basis
Aim to save up at least your upfront costs and three months of rent, plus expenses, before leaving the nest.
Saving up to buy
With 74 percent of U.S. adults citing homeownership as part of the American dream, it might be an important part of your future plans. But if you’re planning to buy a place rather than rent, there are many more associated homeownership costs you’ll need to save for.
Buying a house requires a down payment — almost like a deposit on the home. The total cost of a down payment varies depending on your mortgage loan, the home you’re purchasing and your credit, but you can generally expect to pay anywhere from 3 percent to 20 percent of the total purchase price. On a $200,000 home, for example, that would mean a down payment of $6,000 to $40,000.
These numbers might seem jaw-dropping at first glance, but they’re not necessarily out of reach. You’ll need to consider the following:
- Determine your estimated down payment. Consider speaking to a loan officer at a local bank or mortgage lender for guidance on this. Or play around with Bankrate’s down payment calculator.
- Nail down your timeframe. When are you looking to buy? This will help you determine how much you’ll need to save each month to get there.
- Budget toward those savings. Once you know what you need to save on a monthly basis, you can start budgeting out your expenses to free up any extra cash.
- Automate your savings. Consider setting up automatic savings deposits (from your paychecks or checking account) or using a savings app to keep your savings goals on track.
- Bank those windfalls. Getting a Christmas bonus? A tax refund? An inheritance? A birthday check? Dedicate that chunk of cash — in full — to your house fund.
- Build in flexibility. Sometimes extra costs come up, or you bring in less money than you thought. Make sure you have a little cushion (both financially and time-wise) in the event something goes off course.
Money tip: Keep in mind that the down payment isn't your only cost if you're going to buy a home. You'll also have closing costs, which usually account for anywhere from 2 to 5 percent of the total loan balance, as well as fees for inspections, appraisals, insurance and more. Many lenders will also ask that you have enough cash to cover at least 3 to 6 months of mortgage payments, too.
If you want to buy a home but the costs seem too daunting, there are several other approaches you can take:
- Bring in a roommate to help share the costs of the house with you. This will help both upfront and on a monthly basis.
- Consider a home that’s on the smaller side, like a townhome or condo unit. These typically come with much smaller down payments, mortgage costs and, in many cases, monthly utility costs as well.
- Look into low-down payment loans. VA and USDA loans require zero down payment if you’re eligible, and FHA and conventional loans require just 3 percent to 3.5 percent down. There are also down payment and closing cost assistance programs that might be able to offset the upfront costs of buying a house.
Moving out FAQ
When moving out, consider the following costs:
- Rent (if you’re renting) or mortgage (if you’re buying)
- Down payment or security deposit
- Moving services and rentals
- Furniture and appliance purchases
- Renter’s or homeowner’s insurance
If you’re renting for the first time, you’ll need to first prepare some documents for applying for rentals, including proof of income, identification and bank statements. Once you’ve been approved for a rental, you’ll need enough money to cover first month’s rent and the security deposit, which may vary depending on the landlord and location.
Ensure that you establish an estimate of your moving costs, so you can create a timeline and goal for your savings. Try to find areas to cut down on spending, and don’t spend more than you make. Also, consider using a budgeting app to help you track your expenses and receive suggestions on which areas you can save more in.
— Bankrate’s René Bennett contributed to an update of this story.