Facing a tough economic environment and job market, more kids are living at home, and staying longer, after college, and more grandparents, facing budgeting woes in their retirement years, are coming back to live with their adult children. That has led to more households with three generations (or more) under one roof.

While the number of these multi-generation households grew only slowly between 2000 and 2008, the number spiked from 2008 to 2010, jumping to 7.1 million, or 6.1% of all households, up from 5.3% in 2008 and 4.8% in 2000, according to an AARP Public Policy Institute population analysis.

It's not hard to lay blame for the trend on the economy. Two-thirds of adults living in households with extended family members named the economy as one of the reasons, and 21% of them said it was the only factor, at least according to a survey conducted by Harris Interactive for Generations United.

The good news is that almost three-quarters of those surveyed said these arrangements had actually improved their financial situation, or at least that of one family member. The Pew Research Center found that poverty rates are significantly lower in these households (even though they take in a slightly lower amount of median income after the number is adjusted for household size).

Serving such households can be tough for financial advisors. Samuel R. Scott, a fee-only advisor and the president of Sunrise Advisors Inc. in Leawood, Kan., says there are painful economic realities confronting many of these families.

"Many of them are not there by choice," he says. "Whether it be a younger generation supporting an elderly parent or a family supporting a recent college graduate looking for work, the incentives for developing a long-term plan for saving or retirement are often offset by short-term necessity."

Joel Redmond, a vice president and senior financial planner at Key Private Bank, says two main challenges often arise with more than two generations living under one roof: "First, dependents have less money; they would be able to maintain their own households if that were not the case. Second, the wealth of those supporting these individuals depletes more rapidly."

This depletion means that there is more of a strain on the home owners, hampering them when they are trying to both develop and protect their wealth. It "poses an immediate threat to their financial position, cash flows and goals," Redmond says.
Advisors working with these households must also deal with many different personalities, says Stacy Francis, the president of Francis Financial in New York.

But there's a flip side to this discussion: These families also create opportunities for financial advisors.

"A big one from a business standpoint is the opportunity to serve multiple family members living in the same household, which provides business continuity," says Diane M. Pearson, an advisor and shareholder at Legend Financial Advisors in Pittsburgh. "When a family member passes away, the relationship with our firm has already been established."

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