If you have graduated from college but are still living at home, you’re not alone. In fact, according to the Pew Research Center, more young adults now live with their parents than any time since the Great Depression. In July 2020, 52 percent of adults aged 18 to 29 were living under the same roof as their parents, which equates to 26.6 million people. Before 2020 — and thus, before the COVID-19 pandemic — the highest measured percentage was 48 percent, way back in 1940.

The stats shouldn’t come as too much of a surprise. Millennials are marrying later than generations before them as well, Pew says. Many are also facing crippling student loan debt (about $500.5 billion of it, according to the Education Data Initiative), which keeps long-term financial dreams at bay. The realities of the pandemic compounded these challenges, with many millennials who had already flown the nest moving back home amid economic downturn and widespread job losses.

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.

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.

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 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 savings account that offers a high interest rate, as this will earn you more on what you save. 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. Apps like Mvelopes or Mint can help. You can also utilize one of the many automatic savings apps that are 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.

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 use it for small purchases only. 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. Not only are the up-front 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 for.

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:

  • Water
  • Electricity
  • Gas
  • Renter’s insurance
  • Internet service

You should also check 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, U-Haul rentals or moving company fees, if you opt to use a pro.

Use a spreadsheet to tally up all these expenses and determine 1) what your move will cost you up front and 2) what the rental will cost on a monthly basis. Aim to save up at least your up-front costs and three months of rent, plus expenses, before leaving the nest.

Saving up to buy

If you’re planning to buy a place, you’ll need significantly more savings to make your move. 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 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.

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.

Other options

If you want to buy a home but the costs seem too daunting, there are several approaches you can take. First, if you’re willing, you can bring in a roommate to help share the costs of the house with you. This will help both up front and on a monthly basis.

You can also 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.

Finally, you can also 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 to 3.5 percent down. There are also down payment and closing cost assistance programs that might be able to offset the up-front costs of buying a house.

At any rate, whether you’re hoping to buy a house or just rent for a while, a solid savings plan is the key to getting you there. Start now, and you’ll be living on your own in no time.

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