mobile-bannertablet-bannerdesktop-banner

The Surprising Reason You Should Live Near Your Parents

Feb 23, 2017

Millennials often get slammed as being lazy for refusing to let go of mom and dad's apron strings. But new research shows that there's an altogether practical and economically rational reason for either refusing to move out of your parents' home or choosing to live close by.

Younger workers without an advanced education are reaping an ever smaller slice of the nation's economic pie. At the same time, an increasing share of millennials are having children out of wedlock and in part as a result are struggling to emerge into the middle class.

One effect of these socio-economic trends is that the benefits of living close to home for young workers have never been greater.

A recent study by the Federal Reserve Bank of Cleveland puts this into perspective.

Researchers looked at workers between the ages of 25 to 35 who were laid off from their job after at least two years of full-time employment, and then compared the earnings of those who lived in the same neighborhood as their parents to a couple of other groups — those who lived within commuting distance and workers who lived even further away.

While all groups saw their earnings decline after being let go, the paychecks of workers who lived near mom and dad recovered much more quickly than the workers who lived beyond driving distance. The study used annual data from the Panel Study of Income Dynamics (PSID), a University of Michigan longitudinal survey that measures household socio-economics and health.

"The positive effect of one’s parents’ presence dissipates gradually with distance, not sharply at the border of a neighborhood," note the study's authors.

The authors point to a couple of theories about what's going on.

One paper by University of Chicago professor Greg Kaplan that found that living near home, or with your parents, offers a kind of insurance in case you're laid off. Other research shows that parents can enlist their social network to help their progeny find new work, and might also motivate and encourage their kids to apply for another position that they may not have otherwise sought.

So living near home helps you get back on your feet quicker.

But what characteristics did the people who lost their jobs share?

The study looked at 1,350 "job displacement events" and found that displaced workers, whether they lived close to home or further away, were younger, less educated, and employed for a shorter period of time than non-displaced workers.

A 2015 analysis by The Upshot found that the average American adult lives only 18 miles from their mother, and just one-in-five live more than a few hours drive away.

Those who live farther away, per The Upshot, are people with college or advanced degrees and higher incomes. People want to move to where the best places for their job prospects, and that usually means large cities.

Two income households can better afford to pay for services like child care as they pursue their careers. Lower income, less-educated families don't have the same luxury and must rely on familial help.

Which they need. Almost 60% of parents aged 26 to 31 had their children out-of-wedlock, according to a recent Johns Hopkins University study. Families with an annual income below $30,000 were about twice as likely as to say that it's hard to find affordable and high quality after-school care than households that earned more than $75,000, per Pew. Richer families are also much less likely than poorer families to rely on family members to watch their kids during the day.

This marks a huge shift in family formation.

Almost half of children today are living with two married parents, according to a 2013 survey from the Pew Research Center, and a third are living with a single parent. In 1960, almost three-quarters of kids resided with two married parents, and fewer than one-in-ten stayed with a single parent.

A new piece of research shows that young people are more likely to have their first child outside of marriage in areas of high levels of income inequality with few middle class jobs that don't require a college degree. In places with more so-called middle-skill jobs, millennials are more likely to get married before having kids.

One of the most precious resources available to young, low-income workers and households is the time of a mom and dad who can help them navigate major life events, like having a child or losing a job.

To tap that resource, though, you can't afford to leave home.

All products and services featured are based solely on editorial selection. MONEY may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions