What to consider with multi-generational living on the rise

Since the financial crisis of 2008 occurred, multigenerational households have increased in popularity across the United States. It’s not hard to see why. A growing number of families have serious financial considerations to tend to, including children who are heading to college and aging parents that need care. For a significant majority of the population, cohabitating with multiple generations makes the most sense. 

In 2009, the last year of the Great Recession, Pew Research found that 17 percent of Americans lived in households that were multigenerational. By 2016, that number had increased to 20 percent. 

There are so many benefits to living in a multigenerational household, especially if you are able to have children and their grandparents under the same roof. As a busy adult, you’re able to look after your children and your parents in the same location, guiding them through different phases of their lives. Additionally, senior family members and young adults can do a phenomenal job taking care of each other, sharing hobbies, enjoying healthy amounts of exercise, and helping with minor chores.

A major advantage to having everyone living in the same location involves protecting and guiding them financially. In one household, you may be managing multiple financial situations, such as:

• Planning for your children’s college funds.
• Establishing security for your own retirement.
• Helping your parents live out their golden years comfortably.
• Having tough conversations about beneficiaries, insurance, and wills.
• Understanding your home (or your parents’ home, if you live in their household) as an asset

On top of that, you have the usual homeowner obligations, such as keeping up with repairs. Let’s take a look at how to assist older relatives who share your home. With your research skills and awareness, you can help your household stay current on common expenses and avoid scams and other financial downfalls.

Consider home maintenance budgets and warranties

With a whole family in one household, it’s important to have recurring discussions about who contributes what. This covers everything from household chores to major expenses like roof replacements and appliance upgrades. 

In multigenerational households, needs change frequently. Health concerns and changing work and school schedules create constant shifts in realistic contributions and commitments. We recommend having household financial discussions:

• Before each school semester (if your household has students in elementary, high school or college).
• Following any major medical event.
• After any change in job status, including a shift change.
• Prior to family vacation and holiday spending.

In addition to making the most financial sense and setting everyone at ease, this models positive behavior for young members of the household. 

If you live in an aging home, maintenance and necessary upgrades are of particular concern, and a lack of proper planning can prove devastating. You may have to upgrade plumbing systems, appliances and more. Older homes also require more frequent repairs, but you can budget more efficiently and cope with these expenses with a home warranty. The best home warranties have minimal home inspection requirements and no age limits on existing appliances. 

End-of-life arrangements and life insurance

In multigenerational households dependent on household members’ social security benefits, disability benefits, or job-related income, it’s imperative that family members make end-of-life arrangements. These plans detail how to pay for burial expenses, among other considerations. 

While multigenerational families tend to focus on doing this for the senior members of the family, it’s crucial for all adults to have this figured out. In a three-generation household, for example, it’s potentially important that the grandparents get custody of the children if anything happens to the parents. Consult with a lawyer and layout your wishes clearly in a will; ensure that the whole family reviews their documents yearly. 

End-of-life planning also includes funeral arrangements, which usually run about $11,000. Depending on each family member’s stage of life, different types of life insurance may work best for them. Term life insurance, which generally lasts 10 to 30 years, usually only covers death-related expenses. As you approach 50 years of age, this type of insurance gets more expensive (it’s a morbid numbers game: as you age, you are more likely to die).

Whole life insurance is meant as a long-term life insurance solution and pays more than just death benefits; that’s because you pay into it over time. As is the case with any type of insurance, it’s critical to scrutinize the terms before you sign up. 

Some life insurance includes a waiting period before you can use it, while other coverage may begin immediately. You should also evaluate the various clauses, including those pertaining to suicide or accidental death.

Budget for health insurance expenses

Regardless of age, health insurance costs are major expenses for most American families. While some expenses like monthly premiums are predictable, major illnesses and resulting hospitalizations are not. For many individuals, a health savings account can be of use here, but for most families, unexpected expenses require working directly with hospital billing departments to work out payment plans. If you’re living with older members of your family, expect to help with those calls.

Depending on your age and health, a group health insurance plan might work best for you, while Medicare is usually the most cost-effective option for senior citizens. Children not covered by their parents’ policies usually have health insurance options offered at the state level.

Beware of reverse mortgage scams

Older household members can feel like a burden to younger members of the family, even if they’re the homeowners. With rising medical costs and fixed incomes, senior household members often want to do all that they can to contribute to the household’s finances. This can lead them to consider a reverse mortgage option.

For senior citizens who aren’t concerned with leaving a house to their family, a reverse mortgage might be ideal. Technically called a Home Equity Conversion Mortgage, reverse mortgages are the last resort for senior homeowners struggling financially. While there are many legitimate reverse mortgage options out there, many disreputable businesses use reverse mortgage to practice predatory lending on seniors. 

Reverse mortgages allow individuals with home equity age 62 and older to receive an upfront cash sum against the value of their home. These funds become due when the homeowner sells their home or dies, usually resulting in the loss of a senior’s home upon death. 

For seniors whose homes house their families, a reverse mortgage agreement can be devastating, as their families need to figure out new living arrangements as they make funeral arrangements. Still, many senior citizens are pushed into signing reverse mortgage agreements. 

Through careful financial planning that involves the whole family, planning for home maintenance and appliance expenses, and educating your senior members of the household about end-of-life planning and potential scams, your multigenerational household can work together to ensure a healthy present and future for the entire family.