If you’ve graduated from high school or college and are still living at home, you’re not alone: According to Bankrate’s Financial Independence Survey, more than two in five millennials (42%) age 23 or older currently or have previously received ongoing financial assistance from a parent or guardian.
According to Bankrate’s Delayed Financial Goals Survey, nearly two-thirds (64%) of millennials and 55% of Gen Zers said they’ve delayed reaching their financial goals due to the current economic situation. Additionally, many are struggling to pay off student loans.
Still, that doesn’t mean the outlook is doomed. It just means that saving, investing, and budgeting are key to helping young Americans overcome these hurdles and get out on their own (either renting or buying a home on their own). Want to make your dream of moving out of your parents’ home a reality? Consider this your guidebook.
How to save money for moving
Whether you’re buying a house or renting an apartment, you’ll need to have enough savings to make it happen. Renting requires a deposit, fees, and other costs, while buying a home requires a large down payment and fees. The average monthly mortgage payment nationwide is about $2,200.
To reach your savings goal, start by paying off your existing debt. Since you’re living at home and your expenses are likely low, you should allocate a significant portion of your current income to paying off student loans and other high-interest debt. The faster you can pay off these debts, the easier and faster you’ll be able to save for your own home. As a nice little bonus, paying off these debts will also improve your credit score, which will help with rental applications and mortgage applications.
Here’s how to start saving:
1. Open a savings account
First and foremost, you need a high-yield savings account so you can earn more for the money you save. Current savings interest rates are high, around 5 percent in some cases, so this is a great opportunity to maximize your returns. Compare different banks and credit unions to find the best interest rate available. Online institutions often offer more competitive interest rates than traditional brick-and-mortar banks.
2. Increase your income
Earning an income is essential to pay for both the necessities (housing, food, bills) and non-essentials (entertainment, eating out). But more than that, you need to earn more to save more.
So, consider increasing your income wherever you can – this could be by working extra hours at your day job, starting a side hustle, or going freelance.
3. Create a personal budget
Minimizing your expenses will give you more cash to put towards savings. Commit to not spending more than you earn as a general rule (doing so will only put you in more debt) and start budgeting each individual expense.
Knowing how much you need to save will also help you budget your funds and create a timeline for reaching your goal. Use this savings calculator to find out exactly how much you need to save each day and each month to make your move a reality.
4. Build trust
Whether you’re buying or renting, your credit score will affect your move and the cost involved, so having a good credit score can help if you want the freedom to choose your property and keep costs to a minimum.
Your credit score is determined by a variety of loan- and credit-related factors, including your payment history, credit utilization, credit history, and new credit inquiries.
Paying off your debt can significantly boost your credit score, but there are other ways to improve that number.
- Get a credit card (if you don’t already have one) and keep your credit utilization ratio low. Commit to paying off your debt in full and on time each month. Use this credit card to pay for things you already pay for, like groceries or your cell phone bill, and don’t let unnecessary purchases add up to debt.
- Become an authorized user on your parent’s account or anyone else’s account with an established credit history.
- To be on the safe side, get your credit reports from Experian, TransUnion and Equifax. If there are any errors or inaccuracies, report them so they can be addressed. Fixing them could significantly increase your score.
Remember, don’t close your accounts, even after you’ve paid off the account balance. Credit history is a big factor in your score, so it’s very important to keep those old accounts on your record.
Costs of moving out
It’s easy to think about the major expenses you’ll incur when moving out, like your monthly rent or mortgage payment, but there may be other costs you haven’t considered.
As a renter, you may need to hand over the first and last month’s rent, as well as a security deposit, when you sign the lease. Some places also charge an application fee to cover the cost of credit information, background checks, and other paperwork. These fees vary and aren’t always included, but they may be depending on where you plan to live.
Other move-in related costs include:
- Moving expenses (hiring movers, renting a truck, moving supplies, etc.)
- Water, electricity, gas
- Telephone and Internet
- Update your driver’s license, bank account information, car, and other official information with your new address
- furniture
- Supplies
- Decoration
- bedding
- Technology (such as a computer or television if you don’t already have one)
- food
- Pet fees (if applicable)
In some cases, there may be a fee to activate those services, like a utility bill, which could mean additional upfront costs.
Key Stats
- 68% of American parents with children over the age of 18 say they have made financial sacrifices to help their adult children financially. (Bankrate)
- Thirty percent of Gen Zers rent from a landlord, while 39% of millennials rent from a landlord. (Bankrate)
- While the majority of young people (62% of millennials and 63% of Gen Z) say homeownership is part of the American Dream, 73% of aspiring homebuyers say they cannot afford it (Bankrate).
- Nearly a quarter of millennials (26%) said they have put off buying a home due to financial concerns (Bankrate).
- Many young people are struggling with student loan debt. Young people ages 25 to 34 have about $482.4 billion in student loan debt, while adults under the age of 24 (many of whom are still in college) already have $104.2 billion in student loan debt. (Studentaid.gov)
- At the peak of the pandemic, the share of young people (ages 18-29) living with their parents peaked at 52%, but data a year later found that about a third (33%) of 18-34 year olds still lived with their parents (Pew Research Center).
Save for rent
To start saving for your future rental home, research rent rates in your area. A general rule is to keep your rent at no more than 30% of your monthly take-home pay. However, the less money you spend on rent, the more money you’ll have for short-term and long-term savings goals. Once you know how much rent you’ll be paying, add another 30% for living expenses. This includes things like:
- water
- electricity
- gas
- Rental Insurance
- Internet Services
You should also find out if the rental property you’re considering requires a security deposit. Many landlords will ask for a security deposit as well as the first and last month’s rent. If you’re bringing pets, you may also need to pay a pet deposit. You should also consider moving costs, such as packing materials, moving truck rental, and movers’ fees.
Use a spreadsheet to add up all these expenses and determine:
- The initial costs of moving
- How much is the monthly rental fee?
Aim to save up at least upfront costs, three months’ rent, plus expenses before you leave the nest.
Saving to buy
According to Bankrate’s Home Affordability Report, 78% of U.S. adults say homeownership is part of the American Dream, so homeownership can be an important part of your future plans. But if you plan to buy a home instead of renting, there are many more costs associated with homeownership that you’ll need to save for.
You’ll need a down payment to buy a home. This is like a down payment on a house. The amount of your down payment will vary depending on your mortgage, the home you’re buying, and your credit score, but you’ll generally pay between 3 percent and 20 percent of the total purchase price. For example, on a $200,000 home, your down payment will be between $6,000 and $40,000.
While these numbers may seem staggering at first glance, they are not necessarily out of reach. Here are some things to consider:
- Determine your estimated down payment amount. Consider speaking with a loan officer at your local bank or mortgage lender for advice, or try Bankrate’s down payment calculator.
- Set a deadline. When do you plan to buy? This will let you know how much you need to save each month to get there.
- Create a budget for your savings: Once you know how much you need to save each month, you can start setting aside extra cash by budgeting your expenses.
- Automate your savings: To help keep you on track with your savings goals, consider setting up automatic savings deposits (from your paycheck or checking account) or using a savings app.
- Save your windfall. Got a Christmas bonus? A tax refund? An inheritance? A birthday check? Put that cash lump sum into a home loan.
- Build in flexibility. Sometimes you’ll incur additional expenses or make less money than expected, so leave yourself some wiggle room (both financially and time-wise) in case your plans go awry.
Other cost-saving options
If you want to buy a home but think the cost is too high, there are a few other options.
- Invite a roommate to help split the rent with you. This will help with both the upfront and monthly costs.
- Consider smaller homes like townhouses or condominiums. These homes typically require a much lower down payment and mortgage cost, and often have lower monthly utility bills as well.
- Consider loans that require a small down payment: VA and USDA loans don’t require a down payment if you qualify, while FHA and conventional loans allow for a 3% to 3.5% down payment. There are also down payment and closing cost assistance programs available that may help offset the initial costs of buying a home.
— Freelance writer Dori Jin Former Bankrate writer contributed to updating this article. Renée Bennett An earlier version of this story has been updated.
