“We may not be able to prepare the future for our children, but we can at least prepare our children for the future.” – Franklin D. Roosevelt
A parent’s role, even before their child is born, is to protect and provide for them; throughout childhood and into young adulthood a parent is entrusted with the responsibility of providing food, shelter and safety for their children. The question many parents struggle with though is at what point in a child’s life should a parent take a step back and encourage their child to start shouldering some of those expenses on their own? From conversations I’ve had with clients and friends it seems that in some ways, the better the parents’ financial position the harder this question is to answer.
Charge kids rent
Statistics tell us that more and more young adults are choosing to continue living at home with their parents once they start working rather than moving out into a place of their own. If asking an adult child to contribute to household costs is of genuine benefit to the family finances, the request to pay room and board might seem more reasonable than if the parents are in a position to continue covering those expenses. The heart of the issue though, is not whether or not the parents can afford to continue providing for their child, but if asking the child to take on the responsibility of covering those expenses is actually helping to set them up for financial success and potentially saving them from falling into the debt trap.
Living in the real world
Living in the real world and covering the expenses associated with food and shelter, is often far more expensive than many young people realize. I had the good fortune to teach a financial literacy course through Junior Achievement to a class of Grade 9 students a couple of months ago. Every single one of the kids in that class was shocked to realize how much basic living expenses add up to and how little discretionary income the average working family has after they’ve paid all those expenses every month. On the one hand it’s understandable that parents wouldn’t want to share the details of their monthly expenses with their kids but on the other hand we aren’t really doing our children any favours by sheltering them from the reality of a world they will have to live in sooner or later rather than arming them with information and teaching them strategies for survival.
Moving out is expensive
In my family, both my sister and I moved out of home and into our own places shortly after leaving school at 18 and we both learned the hard way how expensive the real world is and how tricky it can be to get by on a small income when going through university and starting out on our working lives. My brother, on the other hand, stayed at home until he was 32, paid minimal rent, worked hard and saved like a demon until he had enough for a down-payment on a house and a really nice car. Now that we’re all in our late 30s our financial situations are much more even but if you were to rewind the clock 10 years, my brother would definitely be the one who was very much ahead purely because his living expenses were so low.
My parents chose to charge my brother only a token amount of rent because they wanted him to be able to save. Luckily for them, my brother is a great saver and so he was able to do exactly that. When he finally moved into his own house, most of the money that had previously been purposed for savings was redirected to pay for living expenses and so the amount of his discretionary “fun” money remained about the same each month. I’ve talked to other parents though, who know that their kids will quite happily spend every extra penny that they have on “stuff” rather than save. This can be a real challenge when the child moves out because the increased living expenses seriously impact the standard of living they’ve been used to and this is often when they give in to the temptation to use credit to maintain that lifestyle rather than cutting back on expenses. These parents chose to charge their children an amount of rent that is closer to what they would be paying if they were living outside the home and treated it like a forced savings plan. They put the money aside (without the child knowing) with the intention of giving it back to the child at a later date, probably when they buy their first home.
At the end of the day though, whether parents charge their adult children rent because they need that money to help with household expenses or because they want to help their kids to save, it seems that giving them the experience of handling real world expenses while still living at home makes the financial transition easier when kids do finally move out into their own place. What do you think? Did your parents charge you rent? Do you charge kids rent? I’d love to hear your comments.