8 min read

Should you charge your kids rent?

Increasingly, adult children are staying in the family home for a lot longer than expected. Add this to ‘boomerang kids’ – children who previously moved away but end up moving back home – and it’s throwing a spanner in the works for parents’ finances.

Young adult child on the sofa watching TV while parents look on

The OneFamily Intergenerational Lending report, which surveyed over 2,000 parents and grandparents across the UK, revealed 4.5 million adult children aged 18-34 are still living with their parents. Some of these will be saving for a house deposit, while others (particularly in London) simply can’t afford to fly the nest, despite most of them having a job. So should parents charge these kids rent?

Half of all parents say they didn’t plan financially to have their children living with them for so long. And this boomerang generation can put a strain on the household budget. Figures from OneFamily’s research show adult children living at home cost parents an average of £260 per month… even if they contribute towards bills!

But actually, having teen or adult children in the house can help make household finances healthier in a number of ways.

Adult kids could help with your mortgage

About 55% of adult children living at home – that’s about 2.4million individuals – help parents with household bills and monthly mortgage payments. The effect of this is that the ‘Bank of Mum and Dad’ is starting to be replaced by a more cross-generational approach to family finances, with both younger and older family members contributing.

It might be hard for parents to get their heads around the idea of charging their kids rent, as they have been used to them being ‘on the payroll’ for a long time. They may even feel guilty about making them pay their way, and some won’t do it for this reason. But not only can it give boomerang kids a push towards independence and teach them about money, it can also improve family relationships as everyone makes a valued contribution to the household.

It’s all about striking the right balance and explaining why you are doing things.

Work out a budget with your kids

If you don’t already have one, start by drawing up a realistic family budget. You can create a simple one for free using a spreadsheet, or there are apps and budgeting software available online. An inaccurate budget is not going to help you, so set aside some time to dig out your monthly utility bills, bank statements, supermarket receipts so you can work out how much you are actually spending.

Keeping a spending diary for a couple of weeks can also help you understand where your money is going if the numbers in your budget don’t match your bank balance. When family finances become increasingly intertwined, ideally everyone will be on the same page when it comes to money.

OneFamily’s research reveals that two thirds of UK families now talk openly about their 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.

How much rent to charge your child

Once you know what expenses you need to cover, you need to work out a fair amount to charge your kids for rent. Some families have found setting the amount as a percentage of earnings works for them. More than a third of adult children contribute to the ‘family pot’ in this way.

10% of families split costs equally between everyone in the house. And another lucky third get away with paying a minimum amount towards household bills due to their parents wanting to help towards their savings. This could be saving for a house with a Help to Buy ISA or a Lifetime ISA .

Parents can choose not to charge their kids rent

Charging your kids rent does not have to be mandatory. 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.”

Alternatively, charge kids rent once they’re earning

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.”

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.

Getting rent from your children may happen naturally

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.

Written by Hannah Smith – Financial Journalist

 

Sources: Research conducted by Opinium Research between 26 May and 30 May 2017 with a nationally representative sample size of 2,018 parents and grandparents.

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions.