The Family Plan: Managing Life in a Multigenerational Household

Eight years ago, Charlie McGloughlin and his wife, Amy, extended a helping hand to his parents. His dad was in poor health, and his disability had reduced the couple's income. A house of their own had become too much for the elder McGloughlins to handle.

So Charlie and Amy bought a five-bedroom home in Philadelphia -- big enough to accommodate themselves, their two children, his parents, and a guest. Charlie's dad died shortly thereafter, but his mother, Judy, has since moved in.

As it turned out, the consolidation of the households was a win for everyone.

"We put it out there that we would take care of them, but with this economy, I'm not sure we would manage without her," says Amy of her mother-in-law. Judy's contribution to the mortgage and groceries makes a huge difference -- especially because of Amy's student loan debt. And since Amy works full-time as a pastor, Judy's help with the grandkids is invaluable. "When I was in school she took on a lot of the child care responsibilities," says Amy. "She picks up the slack."

The number of multigenerational households in this country is growing fast. As of the end of 2009, 51.4 million Americans lived in a home with three or more generations under one roof; that's one in six of us. And it's nearly 5 million more than the 46.5 million Americans in such households in 2007. Put another way, it's an increase of 10.5%, according to statistics from the newly released Family Matters: Multigenerational Families in a Volatile Economy from Generations United.

It's a trend that's unlikely to reverse anytime soon, even if the U.S. eventually experiences a robust recovery. The reasons are varied, but among them are the 78 million aging baby boomers who will increasingly need assistance, and the country's growing Hispanic and Asian populations, which have cultural traditions of living in extended families.

Easing Financial Burdens

Traditions aside, for many, the reason to set up house with relatives is economic. According to a Generations United survey, 66% of people in multigenerational households cited the economy as a factor, while 21% said it was the only factor. Others attributed the move to a change in job status or underemployment (40%), the burden of health care costs (20%), or a foreclosure or other housing crisis (14%).

And while nobody would say living in a blended household is without challenges, it does ease financial burdens. More than 70% of those surveyed said that going multigenerational improved the financial situation of at least one family member, and half said said that living together made it possible for a family member to continue school or enroll in job training. And then there are the emotional benefits: a whopping 82% agreed that family bonds strengthened despite the stresses.

"If anything good has come out of the recession, it's the lesson that we need each other," points out Donna Butts, executive director of Generations United, which promotes intergenerational collaboration. "Families coming together is not a shameful thing, it's the roots of our country."

Heading Off Potential Problems

Family finances are complicated enough. Add elderly relatives or adult children with kids of their own into the mix and things can easily go off the rails. Children may need help paying bills; grandparents may need help with medical expenses. Grocery and utility bills go up. You might even have to remodel. If you're not prepared, you can end up taking on debt, postponing life events, maybe even delaying retirement.

So if you're already living in a multigenerational household, or thinking about it, what steps can you take to better manage your money -- and your sanity?

For starters, be clear about the reasons for the move. Did the adult couple with children move in to take care of aging parents -- or so that the parents could help take care of the grandkids? Did Junior come home after college because he didn't feel like working or to help pay off student loan debt? The clearer you are up front about motivations, the easier it is to anticipate--and head off--potential conflicts.

Pay attention to emotions. Living together can reveal previously buried fault lines in a relationship. If there's a history of conflict between parent and child, the adult child may worry their newly dependent position will be used against them, says Joshua Coleman, Ph.D., psychologist and co-chair of the nonprofit Council on Contemporary Families. Grown children may feel guilt or shame at having to depend on Mom and Dad again. Parents may worry about putting a strain on the marriage of the adult child they've moved in with.

To reduce stress, any family member who moves in with relatives ought to make a financial contribution to the household if at all possible, Coleman suggests, or find other, non-monetary ways to help out. "Not all family members have the same resources," he says.

Making a Family Plan -- And Sticking to It

Before anybody even touches a moving box, make sure you've tackled the tough questions. Who pays for what? How long is the arrangement going to last? How much is it going to cost?

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Have a discussion about roles and tasks. "The child returning from college may want everything to be like it was in high school, where the parent paid for everything," warns Daniel Keady, director of financial planning at TIAA-CREF Financial Services. "Establish that the level of financial support is not the same."

In cases when health issues have driven the consolidation of households, create a care-giving budget. Make a list of estimated expenses and determine how much the aging parent, the caregiver, and/or siblings can contribute, says the NEFE's Golden. Encourage parents to share their financial records. Caregivers need their charges' financial account information, the names and contact information of their advisers, and the locations of key documents such as wills.

Brainstorm about what each person thinks is the ideal breakdown on responsibilities. Be clear about roles and boundaries -- who cooks, who cleans, who buys what? What is the standard for looking for a job? What are the expectations?

Talk early and often. It may seem awkward at first, but try holding family meetings, formally or informally."The homeowner has the trump card, the last word, but consensus is better for everyone," says Butts -- though there are exceptions. "If the homeowner is about to lose their home and needs the relative's income, they don't quite have the final say."

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Good Times, Hard Times, Family Times

For the Spencer family (pictured below), it's the logistics that are most challenging. Josephine Merrick, 89, initially resisted leaving the North Carolina home her husband built when they first married. But Merrick, a diabetic, wasn't eating properly. A few times she lost consciousness and was found on the floor of her home.

So three years ago, she agreed to move to the 5-bedroom house in Virginia Beach, Va., where she now lives with her daughter and son-in-law, several adult grandchildren -- granddaughter Que Spencer lives there when she's not away at college -- and soon, a great-grandchild. But Merrick has kept her North Carolina doctors, some of whom are three hours away. "It's been tough for my parents, who work full time, to take off work to get her to doctors' appointments. She is never going to switch," says Que.

It's been great having her grandmother around though, says Que -- especially her cooking. "We all pitch in, make sure she has her medicines and help her get around. We're a close-knit family. We've always taken in family and friends over the years."

The New Normal

Multigenerational households like the McGloughlins and the Spencers may be becoming the new normal. "America is used to being the No. 1 economy in the world, but we're seeing a re-emergence of global competition," says John Hauserman, a certified financial planner with RetirementQuest Wealth Management. "Living together is here to stay. This is not the America with its picket fences, where you put mom and dad in a nursing home."

Generations United suggests that more should be done to meet the needs of multigenerational households. Among their many recommendations, they call on banks and other mortgage lenders to adjust requirements for these borrowers, and for corporations to offer more generous paid-leave options.

Amy McGloughlin says she and Charlie have learned a great deal from the experience. "The old thinking was that everything belonged to one person. But our house is for more than us. All we have is to use and share. It doesn't make sense to hold on to things so tight."