The Rent-Free Ride. When should your children start paying?

Would you take your child to court to force them out of your home? Well, that’s what it took for a couple in the USA to kick their 30 year old son out of the house. Time reports the parents gave him several eviction notices, and even offered money for him to move out.1 Sounds desperate, doesn’t it?

Surprisingly, here in Australia there are plenty of 30-somethings still living at home with their parents, about one in ten according to research by Finder, with about 4% of people aged over 40 and 20% of those aged 25-29 also living at home.2

So what’s keeping them at home? Is it mum’s cooking, the wonderful home atmosphere, or perhaps the high rents and low housing affordability forcing many parents to shelve their plans for an empty-nester journey to retirement. We often assist clients saving for their first home who still live at home, and these clients naturally save for a deposit much quicker than those forking out rent each week.

But how does the rent-free ride stop?

Many parents relish their children remaining at home, and there are a huge variety of reasons why multigenerational living is becoming more commonplace in Australia, from cultural norms to rising rents. While it may be unfair for one generation to shoulder the financial burden of younger offspring still living under the family roof, the issue of whether to charge adult children board can be very contentious.

Finder found that some parents argue the rent-free ride should stop when their children turn 19. On in five believe their children should start paying board when they land a job, and a similar proportion of parents is against the idea of charging board altogether.

Parents can be fantastic teachers when it comes to helping kids of any age manage their money and learn to live within their means. Sure, if your child is studying or undertaking an apprenticeship, they probably don’t have much cash to spare. But continually providing a free ride when your kids are earning an independent income can encourage an unrealistic world view.

More to the point, shelling out for adult kids’ living expenses can prove a drain on your finances at a time when you are nearing retirement. Although these funds may not seem like much, over time it can equate to a full holiday in your retirement or more!

But how to encourage independence in your children?

Charging your children board – even just a small amount when they have the capacity to pay – is a stepping stone towards adulthood. For parents who could be looking at spending 20 years or more in retirement, every bit helps to stretch their own money further.

If you’d prefer your adult child to start paying their way, try to approach the subject with tact. No one enjoys a surprise announcement that they’re suddenly expected to cough up cash on a regular basis. But be firm. However much you choose to charge, it is important that the board is paid regularly. This sends a strong message that bills need to be paid on time, and that they need to be paid first, ahead of life’s luxuries. Surely that is an essential life lesson we should pass on to our kids!

If you’re concerned about your children taking advantage of this oft offered free ride, then try some of the strategies above. If your children won’t listen to mum and dad, then we can help as a middle man, providing more ideas or helping grow your child’s financial knowledge, or perhaps planning for their future property purchase. Contact us to discuss how we can help out.



7Wealth Pty Ltd ABN 44 609 210 246, is an Authorised Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706
This blog contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, and other companies within the AMP Group may receive fees a’nd other benefits. The fees will be a dollar amount and/ or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.
July 25, 2018