When your kids grow up, at least enough to hold down a steady job, one question many parents and carers might ask themselves is, should I charge my kids board?
Some people will tell you yes, some people will tell you no, but at the end of the day, the answer won’t necessarily be a black or white one, and will really come down to what’s right for you and your family—in other words, don’t spend too much time worrying about the opinion of others.
After all, you may need everyone who’s living under your roof to contribute financially, or if you do have a choice, you may be happy to let them live at home for free, particularly if they’re struggling, not earning much, using what money they do have to put toward study, or saving for something big.
If it’s something that’s been on your mind, we look at some things you may be interested to know and want to consider.
What's happening around Australia?
If you thought the rugrats (whoops – precious angels) would be long gone by now, statistics paint a different picture, with more kids remaining in the family home today than in years gone by.
In fact, figures show nearly one in four Aussies aged 20 to 34 continue to live with their parents, while more than half of those aged 25 to 29, who’ve moved out, have come back, with 52% lasting less than two years and 20% lasting less than a year out of home1.
As for why they moved back in, more than 65% of kids cited financial problems (increased cost of living, housing affordability issues and growing education debt) as the main reasons2.
What are your plans for the future?
Helping your kids out may be important but so will ensuring your own dreams don’t fall by the wayside, particularly if you’re also helping out ageing parents who are becoming less mobile.
You may want to travel, take up a hobby, buy a new car, move to a different area, or have a mortgage you'd like to pay off.
With that in mind, if you need your kids to put some money toward day-to-day household expenses, you shouldn’t feel bad about asking them to chip in financially. Life can be expensive for all of us and there are a variety of ways you can ask your kids to contribute without asking too much.
For instance, you might charge them a percentage of what they earn, ask that they just cover their own personal items (such as car, phone and internet), or agree on a flat rate, which you could even offer a certain discount on, depending on how much they help around the house (love it!).
What about retirement?
The thought of your kids growing up is probably enough of a reminder that you’re also getting older, without the need to mention retirement, but retirement is worth a thought when considering the costs of your adult children living at home.
After all, life expectancy is increasing in Australia3, which means you’ll probably need to account for a longer retirement than your parents. If you retire at 60 and live beyond age 85 for instance, you may be looking at funding a retirement that could span more than 25 years (eek, a quarter of a century).
To give you an idea of the numbers, September 2017 figures show individuals and couples, around age 65, who are looking to retire today, need an annual budget of $44,011 and $60,457 respectively to fund a comfortable lifestyle, assuming they own their home outright and are in relatively good health4.
What are your kids working toward?
Your kids’ future goals and dreams are important, which is why it’s a good idea to have a discussion around what everyone is working toward and would like to achieve.
For instance, they may be saving for a holiday, a car, trying to pay off credit card or education debt, or even putting money aside for a deposit on their first home.
Understanding their goals might help you in your decision making around how you’d like them to contribute. You might be a little more accommodating if they’re doing something constructive than if they’re blowing every last cent, and putting their hand out before each pay day for example.
If they’re a little unsure about their goals and what they’d like to prioritise, our online goals explorer tool might be a fun way to get them thinking.
How you can help them be independent?
Nearly 75% of parents in Australia provide financial support to their adult children5. While you too may feel obliged to, providing adult kids with regular cash handouts can lead to poor financial behaviour and them living beyond their means because they become too reliant on the ‘bank of mum and dad’.
To assist your kids, particularly for when they do move out, here are some things to think about.
- Teach them how to budget and save, about the consequences of unsustainable debt and what benefits an emergency fund might have
- Challenge them to find a better deal with a different (phone, internet or credit card) provider and give them some incentive to do it. These are real life lessons that will stick
- Explain how a loan works. Going through your loan statements with your kids is a brilliant opportunity for financial education. Plus, you can show them how much extra they could end up forking out if they don’t take note of the interest rate they sign up to.
Whatever you decide – whether you charge your kids board, let them live rent free, or allow them to put what rent they could be paying you toward an existing debt or into a savings account - you might want to put a timeframe around it and even reassess the situation every so often.
Our budget planner calculator may help them to crunch some numbers and the AMP Bett3r Account could help them stay on track financially as it enables them to track bills, set up savings goals and know what’s safe to spend.
For further tips for your kids, check out our article - Money mistakes people in their 20s make.
Meanwhile, if you need help managing financially, consider speaking to your financial adviser. If you don’t have one, contact us on 131 267 or use our online find an adviser search function. You can also reach out for some free financial counselling at the National Debt Helpline on 1800 007 007.
1, 2 McCrindle Research – Generation Y: The Causals, The Downagers, and The Boomerang Kids page 1
3 2015 Intergenerational Report – Australia in 2055 page vii
4 ASFA Retirement Standard – table 1
5 Finder - 74% of parents fork out for adult kids: time for kidults to stand on own two feet paragraph 3
Sam Marwood and friends are matching retiring farmers with those wanting to work the land but lack the financial means.