Should you charge your adult child rent?

Think it’s a bit mean to start charging your kids rent the second they get their first pay cheque? Well, not doing so could cause problems down the line for all involved.

It’s harder than ever for young adults to jump on the housing ladder and, with private rentals often being unaffordable on top of the rising cost of living, taking financial care of your grown-up offspring can become a burden, even if you’re happy they’re still living at, or have moved back, home.

Octopus Money found that almost two-thirds (59%) of parents aged 45-65 feel more financially stressed in midlife than they did in their 20s, partly because they’re supporting adult children. A whopping 92% do so, while 17% reckon their child may never be entirely financially independent. As a result, 8% have delayed hitting their own financial goals, and 7% have even pushed back their retirement.

“Parents, ideally, would love it if their children were financially independent, but really, that’s not the case anymore,” says Harriet Davis, financial planner at Smith & Pinching. “It’s not an assumption that they will be financially independent and move out from the age of 18 or 21, as we might have seen previously.”

Why it’s important to pay rent – even at home

Although it can be slightly awkward at first, having to pay rent, even to your parents, is actually an incredibly important life lesson to get to grips with. “It’s one of our largest outgoings in adult life; rent, mortgage, those responsibilities are something we are always going to face,” says Davis. “Living rent free, it could delay independence and [leave children thinking], ‘This is an easy ride, so why would I ever go elsewhere?’ Paying rent at home normalises those adult responsibilities, so when they do eventually feel able or want to move out, they feel financially responsible and understand what is required of them.”

“It’s about preparing them for real life and keeping it fair. You want to make sure it’s financially sensible for everybody, so that nobody is penalised,” adds Davis. “You don’t want parents being resentful that a child is living at home and maybe increasing their costs. And you also don’t want that child to be resentful that a parent is charging them a high rent or a rent they don’t understand either.”

When and what to charge

Obviously, only start to charge rent when your child has a reliable, regular income stream. Announcing a set figure from the off may not go down well though. Instead, have a wider conversation, recommends Davis. “What stage of life are your children in? Are they just turning 18? Are they going into full-time work, or part-time? The job market is hugely challenging for young people at the moment, so what is their income? Would they like to be moving out? What are their plans? How long are they planning on staying? Is their partner moving in too? You can use that to guide the conversation of how much rent [they ought to pay],” she explains. “We tend to see guidelines of 25% of the child’s net income, but that will depend if 25% of their income is going to take away a lot of their financial freedom.”

Take a look at the running costs of the household. “How much is the increase in household bills going to be with your child living at home?” asks Davis. “[Explain]: ‘This is your share. If we were living at home on our own, this is how much the bills would be. Now that you’re moving back in we anticipate our costs to increase by X amount. This needs to be your contribution.’”

You also need to work out a plan around certain expenses, like the food bill. “Are they going to do their own shopping? In which case, the rent might not include food costs.”

Whatever you decide to charge, Davis says you’d like to think that making a profit off your child wasn’t the aim. “You would ideally want the rent they would be paying at home to be less than they would [for a private rental],” she says. “Your children aren’t moving home or staying at home for you to cover your own mortgage or something to that effect. You want the aim to be to make your child financially independent long term, and so your child can learn how paying rent works and real-life responsibilities, rather than just living at home with Mum and Dad.”

It could be a way to support long-term saving

Even for parents who are financially able to shoulder the costs of their child being at home, charging rent could still be beneficial. “If you don’t need that rent from the child, but would like to make them pay rent to teach them those life skills, think about whether or not you are able to maybe give that rent back to your child eventually,” says Davis. It could be stashed in a savings pot and held onto for when they put down a deposit on a house, for instance.

Either way, this is still an opportunity to discuss savings with your child. “Talk about your child’s general saving and spending goals,” encourages Davis. “What are they doing if you are charging them a below-market rent? Is there a way they can save for themselves, independently, for moving out eventually, so that they are in a more financially stable position later on?”