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Should you charge your kids rent?

They've been living in your home rent-free their whole lives, now that they could be earning their own money, is it right to charge your children rent?

According to Think Student, adult children are now living in the family home for longer, with the average moving-out age now 24.6 years.

Given the rising cost-of-living and increased house prices, this isn't necessarily surprising.

Barclays' First Time Buyer Index revealed that it takes first-time buyers roughly eight years to save for a deposit and UK rent prices increased by a staggering 4.2% in 2022.

While your children might simply not be able to afford to move out, there are still a few things to weigh up when thinking about how much rent to charge.

How much is fair rent to charge your child?

If you don’t already have one, start by drawing up a realistic family budget. There are apps you can use for this, but a spreadsheet or notebook will do.

It’s important everyone understands the family budget and is open about their income and spending.

Talk openly about your finances. Sitting down around the kitchen table once a month to go over the budget could be a great way to improve communication in your family.

Once you know what expenses you need to cover, you can work out a fair amount to charge your kids for rent. There are a few ways to do this:

  • Arbitrary amount – this could work for parents who want to charge rent but also help their children save for the future.
  • Percentage of earnings – this means the rent goes up as their earnings do. Good for encouraging them to leave when they can afford to do so.
  • Budget split – splitting costs equally between members of the family.

The right way to charge is up to you and should depend on your individual circumstances.

Factors to consider when deciding how much rent to charge your kids

How much rent will teach your child to budget

It can be hard to think about charging your kids rent, especially if they're used to the ‘Bank of Mum and Dad’ situation.

But paying rent will help them to form the vital habit of paying for essential expenses before splurging. They might even learn the benefits of writing a budget each month, setting them up for financial independence.

You could do some research into how much it would cost to rent a room in a shared house with bills and food included. You might decide not to charge them as much as that but it could be helpful for both you and your child to know what a bargain they're getting!

By making life more like the real world, you help them to prepare to manage their own money while they still have the safety net of the family home. Making it less of a shock when they do decide to fly the nest.

How much money they need to save

As nice as your home might be, it's likely your child does want to move out at some point and for that they need to get saving.

If they find it hard to resist spending money they could be saving, you could suggest charging less rent if they put some money in their savings as well. 

For example, you could "charge" them £500 a month in rent but put £250 of this in a savings account on their behalf.

If they're serious about buying their first home, a Lifetime ISA could get them there quicker as the government adds an extra 25% on to everything they pay in (up to a £4,000 savings limit).

How much it costs you to have them living in your home

It can hard to work out exact numbers, but having one fewer person showering and raiding the fridge will make a difference to your bills.

If you're a single parent, you might also need to pay more council tax if you have an adult child living with you (unless they're still a full-time student).

You could guesstimate how much you're paying for them to live with you, or simply work out how much you pay and charge them a percentage.

How much rent are other parents charging their kids?

Tasha - charges rent to teach her son about budgeting

Tasha lives in East Anglia with her husband and three children and writes a parenting blog called Mummy & Moose.

When her son turned 16, the family agreed he would contribute to the household once he got his first job.

They gave him the choice to either paying a ‘family rate’ of 30% of his wages and continuing to help out with chores, or a 50% ‘lodger rate’ where he didn’t have to do housework.

“We figured a percentage was fairer than a set amount as he will be at college so probably won’t be working set hours,” said Tasha. “He would prefer to live for free, as we all would, but what would he learn about being an adult? I’ll let you in on a secret though, we are banking half and we’ll be giving it back when he comes to leave home.”

Pragya - chooses not to charge rent

You don’t have to charge rent. For some it just doesn’t feel right.

Pragya Agarwal, an academic and designer living in the North West, has one-year old twins and a 19-year old son. She says she would never charge her eldest rent to live under her roof.

“I feel that, as a parent, my home is always their home and so they’re always welcome here. My kids have a great sense of responsibility and understand the value of money so I don’t need to charge them rent to teach them this. People’s circumstances, of course, differ.”

Tasha’s point about banking half is a particularly good way to help a younger child save for the future, if you can afford it.

Emily - decided herself to start paying her parents rent

Believe it or not, children even volunteer to contribute.

Emily Palmer, aged 19 and a newly published author, said she volunteered to contribute towards household costs.

“I am a young adult and I offered to pay rent. I started paying rent after releasing my kids’ book on mental health. From my perspective, I couldn’t expect to be costing my parents money once I was earning.”

Although some parents would be surprised – or even reject – such an offer from their kids, it does happen.

But whether this is something you want or not, it shows that keeping your children in the loop about how much things cost really can reap the benefits of a more unified household.

Even if it’s just a quick chat around the kitchen table every now and then.

What will you do with the money your children pay you in rent?

You might be thinking of saving your child's rent money on their behalf, perhaps in a Stocks and Shares ISA or in a Lifetime ISA if they're planning on buying their own home.

Or perhaps now's the time to start thinking about yourself and your own future, maybe even retirement.

With our Family Bond, you invest either £25 a month or £270 a year. This money is invested in the stock market on your behalf and as long as you keep paying in and don't take any money out for at least 10 years, you won't pay tax on any money you make.

Plus you choose how long you want to invest for when you open it. So you could choose for it to mature on a big birthday or the year you plan to retire.

Please note that as it is a stocks and shares product there's good potential for your money to grow, but there is a risk that you could get back less than you put in.

Find out more about our Family Bond

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