Should you charge rent when your adult kid moves back in? – The Wall Street Journal

It's starting to look like the period from the 1960s to the early 2000s was an aberration – a golden age that we've now left behind. Since those happy years, homeownership rates have fallen among young people around the world. Jobs have become harder to find and they pay less in inflation-adjusted terms. Bachelor's degrees have become mandatory for many jobs, putting more financial pressure on young people, who may be forced to take out student loans. From the US to Europe to South Africa, it's getting harder and harder for young people to launch their lives. The result is that more and more young people are moving back in with their parents. Usually, it happens when the adult kid loses a job, ends a romantic relationship, or graduates from university, but many other circumstances can force kids back home. This leaves parents with a conundrum. They may be sympathetic to the challenges their adult kid is facing, but they also want to encourage the adult child to take responsibility and move out. Which leads to a conundrum: Should you charge rent? This WSJ article says yes, within reason. – Felicity Duncan.Charging rent when your adult kid moves home.By Beth DeCarbo.(The Wall Street Journal) It's graduation season again. College students will don their best flip-flops to walk across the stage and accept their diplomas. Then they're ready for their next big move…back home..___STEADY_PAYWALL___.More than one-third of young adults – those between ages 18 and 34 – lived at home in 2015, up from 26% in 2005, according to census data..Many parents don't charge rent to their returning progeny, but some financial experts say they should pay their share of the real estate.."By collecting rent you're teaching your kids to budget, to prepare for life," says Kim Luu-Tu, a private wealth adviser with Ameriprise who specialises in generational wealth planning..Mrs. Luu-Tu, who is based in Vienna, Va., has one client whose son dropped out of college and moved back home, where he lived rent-free. He got a job and used his money to buy a luxury car. Six months later, his parents agreed to buy that car from him so he could buy a sports car. Now her client wishes she'd charged rent and put the money toward his wedding or house down payment..Susana Fonticoba, of East Hanover, N.J., allowed her daughter and a friend to move in with her after they both graduated from college without steady, well-paying jobs. Ms. Fonticoba, 60, a self-employed marketing and business-strategy consultant who works from home, let the women, both in their 20s, convert the sunroom in her three-bedroom home into their living space..After a few months, the friend asked if her 4-year-old child, who was living with her parents, could move in as well. "I'm like, really?" Ms. Fonticoba says. "I said, 'OK, but I'm working on my own and need to be compensated.' ".She wrote a rental agreement that stipulated they pay her a portion of their earnings. Neither had full-time jobs, so the amount fluctuated – "a couple hundred one month, $400 another month.".As a self-employed person, Ms. Fonticoba, whose husband died in 2000, has a variable income, too. "There were times I had trouble making ends meet, and they would help me with my expenses.".Unfortunately, the chores slipped. "I said, 'I can't keep the house clean with all these people here.' They said they'd help, but I'd be hounding them to do it.".Her daughter and friend have since moved out, but if her daughter needed to move back, Ms. Fonticoba said she would do it again.."I think it's your responsibility to do what you can to help your child," she says..Culturally, children who return home are often judged as lazy or entitled, says Jason Houle, an associate professor of sociology at Dartmouth College who has studied "boomerang children," as they're called. Prof. Houle finds this view irksome.."It's a tired old trope" that older generations have long applied to younger generations, he says. "It's completely unfounded in the data." What's more, boomerang children typically stay for short periods of time. "Most people who end up on their parent's doorstep tend to do so for a year or two," he says. "They're just getting back on their feet.".Bill and Janelle Hantjis were living in suburban Washington, D.C., when each of their three children returned home in their 20s – staying between one and three years. One child moved back during her continuing education, one to be closer to his girlfriend, and one during a nasty divorce. The couple didn't charge them rent, but now wish they had.."I think in hindsight, I wish we would have charged everybody rent and given it back to them after they left," says Ms. Hantjis, 62, a retired nurse.."It would have been so positive," adds Mr. Hantjis, 61 and retired from the Navy. He and his wife were able to financially support them all, he says, but charging rent would have helped prepare them for "real life." The children are now financially stable, married and living on their own, Mr. Hantjis says..Looking back, they think they did what was right for themselves and their children. "We were a military family that moved around – we didn't make a lot of permanent connections," Mr. Hantjis says. "Our family unit was pretty close. Our narrative was to rely on each other.".If you are going to ask your adult kid to pay for room and board, here are some tips on doing it fairly..Ron Tolley, the general contractor overseeing construction of my house in rural South Carolina, says that before allowing his 22-year-old son, who had dropped out of college, to return home, he and his wife, Misti Tolley, drew up a contract. It spelled out his son's household duties and a monthly rent of about $400 – an amount based on the square footage of his living space and a percentage of the utilities. The contract also detailed the consequences of breaching the deal: If he missed his 11 p.m. curfew, he would be locked out. If he didn't pay his rent, "we would have evicted him, no ifs, ands or buts," says Mr. Tolley, 57..His son complied grudgingly, he adds. "The whole point was not to make it so comfy that he'd stay indefinitely.".His son moved out after about four months, and the rent he paid was put toward the cost of a new family pontoon boat..Consider the following when an adult kid comes home:.Kim Luu-Tu, a financial adviser with Ameriprise, recommends asking for a percentage of the child's take-home pay, anywhere from 10% to 30%, depending on the child's current income and debt.Beyond room and board, parents and children should decide how other expenses will be paid. Car insurance, health insurance, student-loan repayment and other expenses should be covered without parents having to dip into their own retirement savings.In addition to rent, adult children should be expected to help out around the house. Baseline duties involve keeping their spaces clean and doing their laundry and dishes. Ask for help with routine maintenance and upkeep as well, things like yard care, spring cleaning and washing the cars.Spell out in advance the repercussions of failure to pay the rent. Options: Ask the adult kid to "work off" the balance in some way; review the child's expenses and, if a reasonable explanation exists, consider lowering the rent; or suggest a part-time job to help cover the shortfall. Give at least a month's notice if you're considering asking the child to leave to allow ample time to find a safe, affordable alternative..Write to Beth DeCarbo at beth.decarbo@wsj.com

Should you charge rent when your adult kid moves back in? – The Wall Street Journal

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