Here are some things to consider when discussing what contribution your adult child will make to your household.
By Marie Holmes via HuffPost
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Adult children may plan to move back home or find themselves there unexpectedly.
Maybe they’ve just graduated from high school or college and are looking for a job. Maybe they need to save money in order to pay off student loans or other debt. Or perhaps they’ve hit a rough spot and just need a safe place to land.
Increasingly in the U.S., adult children are living with their parents. Twenty-five percent of adults ages 25-34 lived in multigenerational households in 2021, compared to only 9% in 2010. And 68% of these people were residing in the home of one or both of their parents.
Karen Fingerman, a professor in the school of human ecology at the University of Texas, Austin, noted that this same study showed that 20% of the income in these multigenerational households came from young adults.
“So it may be worth debunking the myth that young adults in the household are ‘freeloaders,’” Fingerman told HuffPost.
Whether the living arrangement was planned or came about unexpectedly, these scenarios require a new set of conversations about obligations and responsibilities — including financial ones.
If your child is living in your home, you want to encourage them to act like a responsible adult, and at the same time set them up for independent living. Depending on your circumstances, you may want to charge your adult child rent for living at home with you.
Jeffrey Jensen Arnett is a professor of psychology at Clark University in Massachusetts and the author of “Emerging Adulthood: The Winding Road from the Late Teens through the Twenties.”
He thinks it’s perfectly reasonable to charge rent to an adult child.
“Parents have household expenses, and any other adults in the household have an obligation to contribute to paying those expenses,” Arnett told HuffPost.
“The reality of it is more complicated,” said Arnett, noting that while a 19-year-old and a 40-year-old may both be adult children, their needs and resources are likely quite different.
Here are some things to take into account if you’re thinking about charging rent to your adult child.
What is your child’s situation?
Shang Saavedra, personal finance writer of Save My Cents, suggested the following criteria: “If your child is out of school, is physically and mentally fit and they’re making a living wage, the parents should probably be charging them rent.”
Of course, you wouldn’t charge rent to a child living at home because of a mental or physical health issue. Likewise, if your child is at home in order to pursue an unpaid, or low-paying, internship, that may be a moment for you to step in and offer financial support in the form of rent-free living.
“Parents want to help their children get established and pursue a dream career, but not enable and coddle the child so much that the child would forever rely on the parents,” said Saavedra.
“Ultimately, it’s also the parent’s responsibility to teach the children how to be financially independent,” she said.
What is your situation?
It can be a tricky balance, and your child’s needs aren’t the only ones to take into account.
Sometimes adult children move back home not because they need help, but because their parents do.
“A parent may charge an adult child for rent for living at home if the parent is struggling financially due to a job layoff or health issues. Though a parent may feel vulnerable asking their adult child to contribute, I hope they can take pride in raising a child that has the potential to help their parents,” said Rita-Soledad Fernández Paulino, financial adviser of Wealth Para Todos.
On the other end of the spectrum, she added, “When parents choose to charge their children rent as a means to still have control over their children, that manipulation harms the relationship.”
What are your child’s goals?
“In the United States, there is an emphasis on raising independent adults, but considering we live in a society where not all employers provide retirement benefits or quality affordable health insurance and the rising cost of living, parents need to consider the value of raising children who reach a state of interdependence as well,” said Fernández Paulino.
Multi-generational households, which are the norm in many parts of the world, provide numerous advantages. Grandparents may provide child care. Adult children may provide care for aging parents.
Most adults living in their parents’ homes, however, don’t intend for the arrangement to be permanent.
“In my experience, nearly all emerging adults would rather live outside their parents’ household, even if they all get along well,” said Arnett.
“As soon as emerging adults can afford to move out, most of them will,” he added.
How much should you charge?
“Ideally, a parent should do some research about how much they could charge a stranger for the same living accommodations that their adult child is using,” said Fernández Paulino.
“I rarely see parents charge full rent,” said Saavedra. “Most parents calculate what market rate would have been for that bedroom, and then they do a parent discount.”
Fernández Paulino suggests looking at ads online for one-room rentals, and simply asking your child how much they think they could afford to contribute.
If you’re not in the practice of doing so, talking about money with your child can be uncomfortable, but it’s best to have these conversations before your child’s tenancy begins.
“It’s important to not only discuss the rate but also the emotions that come up. The parent should be prepared to validate the emotions their adult child may have about this financial change,” said Fernández Paulino.
If your child’s earnings are small, you can charge them an appropriate portion of what they’re bringing in instead of what the market rate for the rental would be.
Their financial contribution doesn’t necessarily need to be a rent payment directly to you.
“It may work better if the young adult contributes to household expenditures,” said Fingerman. They could buy groceries every other week, or fill the car up when they borrow it, for example.
“The goal here is create a shared financial environment where adults in the household are contributing money in ways that are feasible and cooperative,” said Fingerman.
If your child is in a situation where they have no income, they might contribute in other ways.
“If they’re not making much money, you can ask them to take on household duties instead of paying rent,” said Arnett.
“There’s certainly no reason they shouldn’t be grocery shopping, making meals, raking the leaves or cleaning the bathroom as much or more than the other adults in the household,” said Arnett.
Arnett noted, too, that by charging more in rent, you may inadvertently be extending your child’s tenancy.
“The more money they pay their parents in rent, the longer it will take them to assemble enough financial resources to leave.”
What should you include in your rental contract?
Ideally, this is not the first time you’re talking about personal finances with your child.
“Parents who have gone 18 years without talking about money to their children are going to have a more difficult time having these conversations,” said Fernández Paulino.
Among other finance-related topics, Fernández Paulino said that she talks to her school-age children about “under what circumstances we would help them purchase a car, pay for college and allow them to live at home.”
Even if you haven’t discussed finances before, it’s never too late. Drawing up a contract together will help each of you communicate your needs and expectations.
Saavedra suggests that you include in your contract how much the rent payments will be, how long the arrangement will last, and what circumstances could cancel the contract (for example, you should be able to cancel the contract at any time).
In the end, the dollar amount of your child’s “rent” payment is less important than you all coming to an agreement about what a fair contribution would be and them following through with it.