Should You Charge Your Adult Children Rent?

Think you’ll be an empty nester any day now? Think again. In fact, roughly one-third of millennials—that’s 22.9 million Americans between the ages of 18 and 34—are living at home with their parents, making it the most common living arrangement among their generation, according to a 2017 report from the U.S. Census Bureau. For those under age 24, a striking 53 percent have moved home at least temporarily in recent years, per Pew Research.

Maybe it’s to wait for that first job offer, pay off student debt, pursue an advanced degree or save for their own down payment on a home or wedding. “Today’s young adults take longer to experience these milestones,” the U.S. Census Bureau report states, noting a dramatic shift since 1975—no surprise given stats surrounding the rising costs of education, uncertain job market and older marriage rates.

Now, instead of contemplating downsizing the family home or turning a childhood bedroom into a home office or gym, many parents are, in a way, returning to parenting. And of course, there are financial implications to putting a roof over your offspring’s head, at any age.

During this so-called boomerang period, families often lack a financial plan for what to do when a big kid moves back home. While there is no one answer to suit all households, for many parents with a millennial boarder the situation begs the question of whether to charge rent. 


Pay to stay

According to Erin Lowry, Broke Millennial blogger and author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together, the answer is obviously yes. If living at home is made too convenient, many of her cohorts will never feel the need to move out, she argues.

“Just because living at home is easy doesn’t mean it should be free,” Lowry wrote in an opinion column for U.S. News. “The easier the lifestyle, the harder it will be for a child to feel motivated to strike out on his or her own and learn the life skills necessary to survive outside the protective bosom of Mom and Dad. “

Still, she and a number of financial advisors suggest a below market value arrangement for paying rent to their ‘rents. Howard Dvorkin, a CPA and contributor at advised a parent in his column to provide a steep family discount for his recently graduated daughter. The payment plan will force her to learn how to budget without undermining her ability to save for the future. 


Free room and board

Of course, many children move out on their own accord, and being able to go home again can be a stepping stone to success. Three-time Grammy-award winning musician Jack Antonoff used his parents’ pad as a home base until he was 29. Now the owner of a beautiful home in Hollywood, the close bond with his parents and inspiration from his childhood home were important contributors to his success, he recently told CBS Sunday Morning. (In fact, he had an exact replica of his childhood bedroom built in his trailer for concert tours.)

John L. Graham, a professor at the University of California, Irvine, and co-author of All in the Family: A Practical Guide to Successful Multigenerational Living points out that while adult children moving home may be a new development in the U.S., it’s not unprecedented globally. “This is the way people have always lived around the world,” he said in an interview with the New York Times.

Graham states that this model provides certain economic benefits. Different generations can provide each other help with childcare or eldercare. Living together also eliminates many of the costs associated with travel for visits on holidays, and provides more hands to lighten the load of work for household chores. Ultimately, the best arrangement likely won’t be the same for any two families, and it could even vary with in the same household between kids.

Did you know...

In the EU, nearly half of 18- to 34-year-olds live with their parents. In Europe, similiar to the U.S., young men are more likely to live at home than young women.*

*Source: Eurostat 2014

Disclosure: HSBC commissioned this article. The views and opinions expressed do not necessarily reflect the views and opinions of HSBC.