03 October 2020

Living with Parents for Financial Success

I will admit that I have a personal bias with this blog post because I do indeed live with my parents in order to save money. I pay my parents approximately $300 per month. I consider this to be a win-win situation as my parents get some money to help pay the bills while I get a roof over my head for very little cost. This allows me to invest more money into shares, ETFs, property, etc.

In my opinion, living with your parents helps considerably with financial success. Many people focus on small expenses when trying to live frugally e.g. they will stop buying $5 coffee each day, which will save $1300 per year. But if you don't move out of the family home, you will save about $25,000 per year (whether you rent or buy your own place).

In the Economic Explained video below on YouTube where there is a discussion about a K-shaped COVID-19 recovery, the economic benefits of living with your parents is highlighted towards the end of the video (starts at 15:20):


This video is interesting because it discusses lifestyle inflation, but it also discusses how most people in Western culture aspire to a three bedroom house, two cars, and travelling every year. Basically Western culture aspires to a nuclear family lifestyle. 

The nuclear family is the ultimate consumerist status symbol. 

The nuclear family is much more expensive and wasteful than most other consumerist status symbols that are demonised e.g. the $5 per day coffee or even Ferraris. Moving out of home costs about $25k per year, but you can rent or buy a Ferrari on finance for less than this.

Most people say that moving out from the family home is natural and that everyone does it, but the video highlights this is not true. Cultures in China, Korea, and Singapore live in multigenerational family arrnagement and have the highest savings rates in the world. Adults live with grandparents and their kids. There is division of labour and in-built childcare, which allows for fast wealth building.

Living with your family does not need to be a parasitic relationship but one where you contribute to the family. You can help to pay your parents' bills so that you have a win-win arrangement.

Cultural bias against living with parents

Within Western culture there is a considerable bias for the nuclear family arrangement and against a multigenerational or extended family arrangement. Anyone over 25 (especially men) who still live with their parents are considered losers, but this in my opinion, is an unfair assumption that goes against economic logic. 

An example of this cultural bias against the extended family can be seen with "household wealth" calculation. Western culture views a nuclear family to be a proper household but multigeneral households are not. For example, I live with my parents, but if someone asked me for my net worth, people would not expect me to aggregate my net worth with my parents' net worth as well. However, when someone is living with his spouse, they often aggregate not just their own wealth but the wealth of their spouse as well. 

The benefit of living with your parents is that you can split costs e.g. heating costs. You can benefit from splitting costs living in a nuclear family as well, but the gains will not be as great because you are splitting costs with only one other person (assuming they work and are not staying at home doing domestic duties). Another problem with the nuclear family is the threat of divorce. If you live with a spouse, even if you're not married (due to common law marriage), there is a risk of divorce. There is a probability of about 40% that you will be divorced. However, if you live with your parents, there is zero probability of divorce and having your assets seized by the courts.

Multigenerational and childfree living

To conclude, living with parents in multigenerational living arrnagements is a great way to get ahead financially. You are able to build wealth up faster by lowering expenses. In my opinion, living with your parents is not enough. To really build your wealth, you should not just live with your parents but also not have children i.e. become childfree. The benefit of the multigenerational household is being able to split costs e.g. the cost of heating is divided by everyone in the household. However, not everyone in the household may contribute. If you have a baby, the baby will not obviously not contribute to the cost of the household. As such, it is best to not have any children and live childfree. This is not a problem for me because I am an antinatalist and believe that is immoral to have children because it increases suffering. However, regardless of my philosophical views, economically it makes sense to not just live with parents but also live childfree.