Should you charge your child board or rent?

Should you charge your child board or rent?

12th February 2018

The number of young adults living with their parents has reached an all-time high, with more than a quarter of people aged 20 to 34 still living at home, new figures have revealed.

Data released by the Office for National Statistics (ONS) shows that the percentage of young adults living with their parents in the UK has risen from just over a fifth (21 per cent) in 1996 to 26 per cent in 2017, rising from 2.7 million to 3.4 million in the past two decades.

The reasons for these adult offspring living at home can vary, but we tend to see the same reasons time and again: saving up for a house deposit, or they simply can’t afford to move out.

So the big question is, should you charge your child board or rent, or letting them live at home for free? We take a look at the arguments for both.

The Cost to Parents

As parents we want to support our children and give them the best start in adult life as possible. Our hearts, and our accounting heads on behalf of our children, therefore often don’t argue with the need for our adult children to stay at home for a while yet. However, when it comes the impact this has on your own finances, you may be inclined to change your opinion. In fact, according to an article in the Telegraph, these young adults are costing their parents in the region of £5,000 per annum.

This has direct knock-on effects for parents. Perhaps they are not only subsidising living costs, but also saving towards that elusive first house purchase? They may also be diverting funds away from retirement savings or putting off retiring itself?

So, should you be charging your adult child board or rent? If so, how much? Or, are there other ways that they can ease the financial load on parents?

Charging Rent

Deciding whether to charge your child rent is an individual decision, with discussions typically beginning in the mid-teens. Once your child is bringing in their first pay packet from a weekend job, you may start re-evaluating how much they get in their monthly allowance, for example. It’s natural that as time goes on this may gradually move to a board or rent charge as your child earns more.

This is a valuable lesson for young people about the costs of living. As a parent you can choose whether to use that money towards the household costs (and mortgage) or whether to put it away for your child to use towards a deposit on their first home.

There are also a number of different ways of deciding how much the young person should pay. Should you charge a set amount, or a percentage? Should you base it on their earnings?

Almost inevitably, the parents will find themselves, once again, facing the parental guilt – should they be charging their child? This is when it is good to remember the importance of teaching our children financial literacy and independence. It also allows everyone to feel valued for making their contribution to the family.

Deciding What’s Best for Your Family

The important thing is to decide together what will work, what is needed, and what is fair. It should never be sprung on the child if you don’t want a temper tantrum whisking you back in to early teen strops. So sit together, be realistic about what they cost, and seek openness about their earnings. Use everything from supermarket receipts to electricity bills and establish what the costs are.

From here, you can begin to get a picture of what is fair. It is very unlikely, certainly at the beginning of this road, that the child will be able to actually cover their costs. Even if they do, you don’t want to convey the message that working is futile because all money goes to Mum and Dad. Therefore, a percentage-based approach can work. Many families find a fair arrangement is one-third of the young person’s earnings. Remember, even if you choose not to use this money towards the actual costs, it can be invaluable to save it for their first home.

Always keep communication about household money open. If you’re charging board or rent then it’s a perfect time to teach lessons about finances for the future, standing them in good stead for when they do fly the nest.

Don’t forget, deciding whether to charge your child rent is an individual decision, sit down, have a think about it and try to come an arrangement that is fair for all.