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Should You Charge Rent?

PayRentPiggyBank.157131716_stdYour college grad boomeranged home and stayed and stayed, and finally got a job but shows no signs of leaving.  What now? Of course, you want them to start making plans for launching their own pad but until then there’s all sort of details to be negotiated if they stay for the foreseeable future.  How should they “contribute” to the household from walking the dog, to making dinner, to running errands, to doing their own cleaning and laundry?  Those issues seem easy compared to the sticky question of whether  you should charge them rent and how much. Living at home is supposed to be a stop-gap measure until young adults get on their feet financially, not as a way for them to live concierge-style and beyond their means with mom and dad footing the bills. Will charging rent get that message across loud and clear?

Two recent pieces, a Huffington Post video and a Forbes article, tackled this topic.  From those pieces and others–and personal experience–we came up not with an answer but with some points to consider as you ponder:

  • How much money does your child earn and where how is it spent/saved?  It’s not unreasonable to ask (help) your boomerang child to make a budget and set savings goals.  For example, if they have substantial college loans perhaps a maximum amount should go to paying them off first.
  • Are you paying their college loans?  Maybe they should take over the payments
  • What’s your financial situation?  Perhaps your own finances are tight and the extra expenses put you over the edge. You could use that rent.
  • Even if there’s not college loans or a tight budget what message do you want to convey to your child in terms of financial maturity? If you want them to learn to save, an alternative might be insisting on a saving accounts with regular deposits.
  • Instead of rent, some parents ask for help with the cable bill or the utilities.  It’s amazing how quickly adult kids realize they don’t need the platinum cable package with 5000 channels or the ac blasting a cool 68 degrees when they are paying for those costs.  Also a useful lessons for when they do eventually move out and pay their own utilities.
  • Once you decide to charge rent how much is fair?  The consensus seems to be that the rent should be based on a percent of the salary. In the Forbes article, financial planner David Blaylock recommends not more than 10 percent of the child’s take-home pay. “The amount should be enough as to feel like a responsibility, but not so much as to be a burden,” he says.
  • What do you do with the rent? Some parents use it to pay household expenses but many—without telling the children—sock it away and then give it back in a lump sum either when the he moves out or when she purchases her first home. Blaylock isn’t necessarily a fan of this setup. “Instead of saving the money without the child knowing about it, you’re missing out on a teaching opportunity,” he says. “The goal is to help your child manage her assets better, so talk about why you’re putting the money aside. Otherwise, it’ll be like Mom and Dad to the rescue again … ‘Here’s this big pile of money!’
  • If you have other children what did you do with them?  Sibling rivalry can rear its ugly head here.  Keep in mind your have a financial history with each child: Did you pay expenses for a private college, a semester abroad, professional help, with one that you did not with another? Does one child feel another got “more,” and even if he did, is that necessarily something you want to balance out?
  • What’s the point of charging rent? Financial responsibility, needed income for parents, a tool to pry them out of the nest?


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