Mar 24, 2023
Either to the absolute delight or chagrin of parents who got their kids to adulthood, grown children across America are moving back home with their parents. In droves. With sacks of laundry. And non-stop appetites. And it doesn’t look like it’ll slow down anytime soon.
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As the Pew Research Center reports, young adults in U.S. are much more likely today than 50 years ago to live in a multigenerational household. The reasons are many: crushing student loan debt and high housing costs among them. While estimates vary widely, the credit reporting agency Experian puts the average per-student loan debt figure at just shy of $40,000.
Now, let’s compare the current lot of millennials and Gen Zs to the hand-dealt baby boomers. Those born between 1946 and 1964 enjoyed a robust economy and plenty of breathing room to become financially independent. Post World War II, affordable housing allowed 45% of boomers to buy their first home between the age of 25 and 34.
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Fast forward to their children, and only 37% of millennials between the age of 25 and 34 own homes, according to the Berkley Economic Review. Adjusted for inflation, the average price for a home in 1970 — $113,000 — had roughly tripled to $337,000 by 2020, an interval of 50 years.
But while it’s hard for adult children, should this automatically translate to rent-free living in the childhood bedroom?
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Pros of charging rent
The most obvious pro for having your child pay rent, even as early as age 16, is their financial independence. Children in their teens may find themselves tempted to blow newly found part-time income in any number of ways. Having skin in the game as a renter will teach them the habits of responsible spending, tracking expenses and delayed gratification.
You could also require them — they are living as a dependent of sorts, after all — to save a percentage of their income for tuition, student loans, several months of apartment rent, or a down payment on their first home. Meanwhile, ask your child to contribute to the upkeep of a home — whether financially or in some alternative form of value. The latter could mean doing routine home maintenance or cleaning that may save you the cost of a housekeeper, for example.
Cons of charging rent
There’s always the chance you’ll get some pushback or whining if you ask your adult child to pay rent. It's hard to feel good about that, especially since you once again have a child’s mouth to feed. But as emotion taints many a family discussion, it pays to keep a cool head.
Sit down with them and in a spirit of collaboration, break down the numbers (including their income) to see what makes sense.
Haven’t asked them yet? Maybe they’re waiting for your invitation.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Teamwork that hits home
There are other circumstances and options to consider. For instance, many adult children aren’t living at home because they want to but because they have to — and want to move on as soon as they can afford it.
Also keep in mind that if your child attends college or a university, or takes part in an unpaid internship, those moves are responsible investments in their future.
Now it’s time to consider the big lesson many schools don’t teach: financial literacy. In this you may find it surprising that adult children and parents can learn together. That’s an exercise in building bonds as well as bank accounts. Speaking of which, you may want to put aside some of the money your kids pay you for their own retirement account or some other financial vehicle.
Imagine their reaction when you unveil such a surprise. You’re rewarding in multiples the fact that they made sacrifices while under your roof. Once it’s time for them to live under a roof of their own, they’ll take your gift — and gratitude — into all the years that follow as they build a life and — who knows? — raise kids of their own.
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Amy Legate-Wolfe is an experienced personal finance writer and journalist. She has a Bachelor of Arts in History from the University of Toronto, a Freelance Writing Certificate in Journalism from the University of Toronto Schools, and a Master of Arts in Journalism from Western University. Amy has worked for Huffington Post, CTVNews.ca, CBC, Motley Fool Canada, and Financial Post. She is skilled at analyzing trends and creating content for digital and print platforms. In her free time, Amy enjoys reading and watching British dramas on BritBox. She is a mother and dog-mom to a Wheaten Terrier.
