Three in five parents don’t charge their adult children a penny to live at home. But is this the best way to get them out of your house and onto the property ladder?
The kids aren't flying the nest like they used to.
3.4 million 20-34-year-olds – one in four – are now living with their parents, according to official figures. Some left home and then came back; others never left.
This isn’t as unusual as you might think: back in 1996 one in five young people lived with their parents.
What’s changed? Well, back in 1996 the average UK property cost £56,000; it's now £224,000.
Although relationship breakdown remains the main reason to return to the childhood bedroom, a fifth of returnees are saving for a deposit for a property, a survey by Skipton Building Society found.
Many others have never moved out of their family home for the same reason.
These young adults are highly likely to be in work but often live rent-free, or close to it, at mum and dad’s expense.
So, should you charge them rent? We’ve looked at the data and talked to the experts about this most awkward of discussions.
How much do adult children living at home cost?
You might have paid off your mortgage or are confident you can manage the rent.
But, according to Jacqui Bateson, customer proposition manager at Skipton, “when you have children moving back into your house that’s almost certain to have a financial impact.”
Bateson, a parent herself, is concerned about a ‘sandwich generation’ of increasingly stretched parents: “very often they’ve got elderly parents they’re having to look after as well.”
Skipton’s research found 72% of parents with adult children at home found household expenditure had gone up, on average by £86 a month or £1,032 a year.
A separate survey by financial advisers OneFamily, on the other hand, estimates £260 a month, or £3,120 a year even if they contribute towards bills.
Those numbers are for just one adult child: many beleaguered parents will find themselves hosting more.
What other parents are doing
If you’re not charging your adult children rent, you’re in the majority.
Two in five parents ask their kids to pay, Skipton found, but the average was a paltry £123 a month, compared to the market average rent of £1,619 in London or £768 outside the capital (albeit for a flat, not just a room).
OneFamily’s survey found only 10% of adult children living at home were expected to pay an equal share of bills.
35% paid a share based on what they earn and another 35% paid the bare minimum. The remaining 20% paid nothing at all.
Nevertheless, over half did contribute financially in some way, if not through formal rent.
Still not sure how much to charge? Our sister site lovePROPERTY tackles the thorny issue in this article.
Remember: you need to en you’re not charging more than £7,500 a year, the maximum you can receive tax-free under the Rent a Room scheme.
Living at home to save up
For some, charging kids any rent at all is self-defeating because it’ll take them longer to save a deposit and buy their own place.
Given that potential first-time buyers could be saving £10,000 a year by living at home, and the average deposit is £33,127 nationwide, not charging rent could get them on the property ladder far quicker.
That’s assuming, of course, that they don’t spend their spare cash. Many parents aren’t convinced and there’s a temptation to use rent to educate their children about the value of money and saving.
Nici Audhlam-Gardiner is managing director of growth at OneFamily and deals with these issues regularly.
“There’s probably not enough focus on practical financial behaviours at school,” says Audhlam-Gardiner, “this is something you need to learn how to do and the younger you learn it the better.”
She’s not against parents charging rent and then using that rent to help their children with deposits further down the line: “I think that can help and sometimes it just depends on the personality of the young person and also their parents.”
“What doesn’t work, I think, is for the parents to completely take away that responsibility from the child, so they almost hide [the money]. They should get the young person involved in that process.”
Audhlam-Gardiner points out that young people save more, proportional to their income, then almost any other group, putting away almost £200 a month on average.
Skipton’s expert Bateson is less convinced: “Your kids want to be independent but living off mum and dad isn’t independent; you’re not helping even if you save up the money and give them that back”.
Have the conversation
What Bateson from Skipton and Audhlam-Gardiner agree about is the need to have an open conversation with your adult children before making any decisions about rent.
Bateson advises you to “talk about the impacts on yourself as a parent and what can the kids afford, whilst still having a life and saving up Come to a reasonable balance.”
She points out that even if you don’t need the money, having your kids help out with weekly shops and pets can take the pressure off.
Audhlam-Gardiner advises that you encourage your child to pick a date: “saying ’this is when I want to own my own house’ is a much clearer goal, rather than saying ‘I’d like to own my house at a later point’ “.
From there you can talk about exact figures your children will need to save and push them towards savings products and investments they may not have heard of.
The Lifetime ISA can give you a 25% Government bonus on what you save, but over half of those who could benefit most aren’t aware of it.
To help out, loveMONEY has put together a guide for saving for your first home.
Other ways you can help
If you’ve got adult children saving for a deposit, it’s easy to become demoralised by sky-high property prices.
You shouldn’t be, because there are several ways that you can help your children get on the ladder – not to mention ways they can help themselves.
Beyond simply gifting them the deposit, there are guarantor mortgages, which lock away some of your savings for a period (you get the money back).
Other mortgages partially mortgage your own property to avoid your children needing a deposit.
Finally, don’t forget grandparents. Careful savings habits and gold-plated pensions mean this generation has wealth to share and Inheritance Tax rules that encourage them to share it.
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