The second sentence is more correct although they are both right. Since you already said "when I was younger" you don't need to say "I used to" because it's implied. "I used to live with my parents" or "When I was younger I lived with my parents."

Salâm, Davood. Thank you for the interesting question. In everyday speech, these two sentences would probably mean the same thing: I lived with my parents when I was younger, but I do not live with them now. The first one, because of the phrase "used to," makes it more definite that I live away from my parents, now. The second one has the same implication, but it is a little less definite. In fact, in the right circumstances it might mean that I lived with my parents when I was young, I moved out for a while, and now I have moved back in or am in the process of moving back in. (I would want to change the sentence so that it is a little less ambiguous in that case.)

Hi, "I used to ..." is the correct construction for CONTINUOUS actions in the Past, which span accross a LONG period of time It comes without saying, that living with parents is always a "continuous action": -- phrase #2 is also possible, but it sounds a bit paradoxical, unless you specify the circumstances. bye