Yahoo Finance 6 Key Reasons To Charge Your Children Rent
Does it sound extreme or unfair to charge your children rent? Don’t write it off as crazy just yet. In fact, many financial experts make a strong case for it at virtually every age.
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Of course, the reasons and lessons change over time. You charge an 10-year-old rent out of their allowance for a different reason than you require your directionless 28-year-old to chip in. Consider the following six reasons to charge your children rent, and forge them into thoughtful, independent adults.
Teach Budgeting
“One of the primary reasons to charge your children rent is to give them real-world experience with financial responsibility,” explained Melanie Musson, mother of five and a finance expert with Clearsurance.com.
“Parents owe their children shelter and protection, so it may seem ridiculous to charge a minor child for rent. But if the parent provides the income from which the rent is paid, they are able to provide their child with a place to live and a chance to practice budgeting.”
Budgets come with two sides: income and expenses. And in the real world, you incur more than just discretionary expenses. When we just give our children money and tell them to go have fun with it, we teach them that life is one big party that doesn’t require any discipline or budgeting.
Consider going beyond rent and charging for other “real life” expenses as well. These could include utilities, car payments, insurance and the like. Try to mimic the ratios they’re likely to see in real life upon moving out on their own.
Keep in mind that this doesn’t mean your children necessarily end up with less discretionary money to spend. If you planned on giving them $20 in allowance, you could instead give them $100, and then bill them for $80 worth of budget expenses. Just make sure they have to actually come back to you with the money to pay you for those expenses, to better simulate the real world.
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Mindfulness of Resources
Don’t want your kids constantly leaving the doors and windows open while the heat is on? Teach them a lesson about it.
“When my oldest son moved back home after college, I had him pay a share of the utilities,” said Rhett Stubbendeck, CEO of wealth planning firm Leverage. “This made him more mindful of his energy use and aware of everyday costs.”
Kenan Acikelli, CEO of Workhy, charges his children for household expenses beyond rent as well.
“I’ve always believed that understanding expenses is just as important as managing income. When my kids were young, I started by asking them to contribute a small amount to household expenses. It’s a great way to show them how budgets work in real life,” he said. “I also factor in utilities and other shared expenses. I want them to understand that everything has a cost, from water and electricity to internet and groceries. It’s important to me that they grasp the full picture of financial obligations.
He concluded, “Personally, I’ve found this approach to be incredibly effective. My children have become more financially savvy and responsible. I think every parent should consider this method to prepare their kids for the future.”
Prepare for Independence
Part of your job as a parent is to prepare your kids for managing complex personal finances in adulthood. The lessons should grow and evolve as your children get older.
Acikelli continued, “For my adult children living at home, I charge rent to instill a sense of responsibility. I’ve noticed that it helps them understand the value of money and the cost of living. I’ve seen firsthand how this prepares them for living independently and managing their own households one day.”
Financial advisor David Blain of BlueSky Wealth Advisors has seen the benefits among his clients. “When I work with young couples or individuals on financial planning, I emphasize the importance of knowing where every dollar goes, including the hidden costs of everyday living. This level of detail helps young adults appreciate the full scope of financial responsibility and better prepares them for managing their finances independently.”
Incentivize Grown Children To Launch
You aren’t doing your grown children any favors by paying for them to lie around the couch playing video games and munching Cheetos all day.
Lynn Layfield hosts the Decision Diaries podcast, in which she has shared her experience with a directionless adult child. “Our reason for charging rent was simple. Our son failed out of college and did not have a plan to move out. He was working, but felt his money was his to spend on fun things and our money should be used to give him shelter, food, and insurance for the rest of his life,” she explained. “In one of our podcasts, my son actually thanked me, which is why I am glad I recorded it.”
Forced Savings
Harrison Tang, CEO of Spokeo, took a slightly different tack with his grown son.
“After graduating from university and getting a job, I told my 22-year-old son I had some good news and some bad news,” he shared. “The good news was that he could live at home rent-free. The bad news is that he had to take the money he would otherwise be paying for rent and put it into a savings or retirement account.”
Tang continued, “He did so, and less than two years later, he had saved up enough to afford a down payment on a small condo (with some help from family members). At age 25, he’s living in a home he owns instead of paying rent.”
The Importance of Contribution
“For young kids and teens, charging a small rent teaches them about budgeting,” noted Stubbendeck. “For adult children living at home, charging rent helps them understand the real cost of living and encourages them to contribute. I’ve seen many parents feel the strain when their adult kids don’t pitch in. Charging even a small amount can make them appreciate the value of money.”
And the importance of contributing their share toward a common cause.
Musson sums up why she charges her kids for rent and other household expenses in one sentence: “Instead of taking it for granted, children can learn that living somewhere requires a cost.”
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This article originally appeared on GOBankingRates.com: 6 Key Reasons To Charge Your Children Rent
