Percentage of Net Income to Charge Son for Rent

[MaggieAnn54]

Our son just graduated from high school and has a full-time job. He may possibly enroll in a technical/trades program in the fall. We want to charge him a fair rent while he lives at home with us to hopefully teach him money management. Unknown to our son, we plan to save most of the money for him to use as a down payment on a house someday. We have provided him with a nice used truck since age 16 with no costs to him except gas, upkeep, and insurance. His college tuition has been paid in full since age 5. Basically, his only bills are normal teenager "running around" costs and cellphone. What percentage of his take-home pay would be a fair amount to charge as rent to his parents? Thank you for your input

[bjl584]

Honestly,
I think that the best thing that you can do for your son in order to teach him financial management skills is to start letting him pay his own way. Have him save up for a house downpayment on his own. Let him take full ownership of his vehicle and all costs associated with it.

As far as rent, I'd charge him whatever is fair to have him living in your house. You could do some ballpark estimates on how much having an extra person in the house is raising your utilities and grocery bill.

I'd start by having him pay you rent that you use to run the household, not money that you will later give him for a house downpayment. Then, I'd set him up with a monthly automatic withdrawl from his account that represents 10% of his income as a starting point. Teach him right off the bat to save 10% minimun and live off the rest. Have a goal of having him raise the percentage amount as time goes by.

[Xtreme Thunder]

When I lived at home, and I got a full time job after college the rent was $180/ mo. which was just shy of 10% my monthly take home pay. I never saw my parents run the numbers, but I know I would if I were my mom. Haha! It was $220 by the time I moved out 3-4 years ago.

So I would say 10% is a nice number.

[DebbieL]

I charge DD19 50% of her net from each cheque. I put all this money aside in a savings account for her that I will give her when she is a bit older/more responsible. Considering she really has no other expenses, I think 50% for her to blow is more than enough.

[disneysteve]

I guess it depends on your point in charging rent. If your point is to teach them to function in the real world, charge an amount that is somewhat realistic. Maybe not as much as an apartment would actually cost but enough that it makes an impact to their income and requires some responsibility on their part. 10-20% seems reasonable for that purpose.

If your point, however, is to force them to save a ton of money unknowingly, then charging more than a real apartment would cost could work. I have not yet been in that situation but I think I would lean toward the first option while working with her to teach her how to budget: 20% for housing, 20% for savings, how much for car, how much for entertainment, how much for clothing, etc. I wouldn't just set a rent amount and leave it at that, though. I'd make sure there was more of an ongoing financial lesson involved.

[maat55]

If you are paying for all the food, I would charge 20% and elect to give back 10%, 20% or none when he leaves.

[DebbieL]

I guess it depends on your point in charging rent. If your point is to teach them to function in the real world, charge an amount that is somewhat realistic. Maybe not as much as an apartment would actually cost but enough that it makes an impact to their income and requires some responsibility on their part. 10-20% seems reasonable for that purpose.

If your point, however, is to force them to save a ton of money unknowingly, then charging more than a real apartment would cost could work. I have not yet been in that situation but I think I would lean toward the first option while working with her to teach her how to budget: 20% for housing, 20% for savings, how much for car, how much for entertainment, how much for clothing, etc. I wouldn't just set a rent amount and leave it at that, though. I'd make sure there was more of an ongoing financial lesson involved.

We live in such a high COL area, that even charging her the 50% of her net wouldn't come CLOSE to covering her own place (even if she had a couple roommates). Once she starts making a lot more money, then it will. This way at least she's ahead of the game as far as having savings. She isn't disciplined enough to save at that level on her own at this point. I'm sure it would be spent on booze, or wasted elsewhere.

[creditcardfree]

I have heard of parents having the post high school child pay for the utilities...gas, water, electricty, phone, cable or a portion. They actually would have to review the bills and write the check. This teaches more responsibility than just writing the parent a check.

You could still save an equal amount as a gift to your child later.

[snafu]

I too am considering this issue. I know the going charge for Room & Board in this community is $500. which includes utilities Breakfast, take away lunch, dinner and two snacks. The kids are required to do their own laundry and can get reduced rent in exchange for chores like weekly lawn care, child care, or specific, weekly household tasks.
I feel that the cost needs to be based on a percentage of income since housing needs to be under 30% of income. I agree with Dr. Steve that we must teach our childen money management. We've been doing the savings, needs, want split and I think/hope our sons are getting it. They've done a decent job of managing their money while away at college.

[riverwed070707]

We live in such a high COL area, that even charging her the 50% of her net wouldn't come CLOSE to covering her own place (even if she had a couple roommates). Once she starts making a lot more money, then it will. This way at least she's ahead of the game as far as having savings. She isn't disciplined enough to save at that level on her own at this point. I'm sure it would be spent on booze, or wasted elsewhere.

Sounds to me like you're sheltering her from even having the option of making her own financial decisions and learning how to manage her money. I see this backfiring by her blowing it all in one lump sum when you finally fork over what you've been saving for her. If she knows your doing this and has agreed, that's one thing, but if you're just secretly saving her money there really isn't a lesson to be learned IMO.

Kids make stupid finaical mistakes. That's how they learn. It isn't until you have something you want to buy and can't afford that you really learn the value of saving and money management.

Also, I don't think I agree with making rent a percentage of income in general. Maybe as a starting place, but what if they get a job that increases their income so they can afford more -- do you then charge them more rent? That hardly seems fair.

[jpg7n16]

I'd make it a lesson style. If you tell him you're charging rent, make him locate comparable rentals (assumption being "what would I have to pay if I moved out on my own?"). Assume 0-2 roommates, whatever he'd actually do, and make him find what his rent would be.

When he brings you the figures, you guys figure it out together. Add a bit for utilities, cable, etc.

Then do something less than that 50-70% of the going rate. Or whatever's reasonable.


I think it'd be more of an eye-opener if he had to see for himself what rates were out there and what it actually costs to live on your own.

Have you discussed this with him yet?

[DebbieL]

Sounds to me like you're sheltering her from even having the option of making her own financial decisions and learning how to manage her money. I see this backfiring by her blowing it all in one lump sum when you finally fork over what you've been saving for her. If she knows your doing this and has agreed, that's one thing, but if you're just secretly saving her money there really isn't a lesson to be learned IMO.

Kids make stupid finaical mistakes. That's how they learn. It isn't until you have something you want to buy and can't afford that you really learn the value of saving and money management.

Also, I don't think I agree with making rent a percentage of income in general. Maybe as a starting place, but what if they get a job that increases their income so they can afford more -- do you then charge them more rent? That hardly seems fair.

You're assuming I'm dumb enough to fork it over to her when she's not responsible enough to handle it? Not going to happen. I don't care if I have to wait until she's 35, then I'll wait until she's 35. Yes, she knows the money is there for her. You do not know my daughter or her situation, so while I appreciate your opinion - in this case I feel strongly that I know what's the best approach for her. She is a VERY immature person for her age in many ways (has some psychological issues). I figure if the time never comes when I feel she's ready for it - at least I have it there to help her out when she will inevitably need it. I've also been putting her child support money in there (actually it just ended, but for the year before it ended I put it all in that account for her). She is very well aware of how expensive things are here. Hopefully someday she will have the independence to actually move out and experience that on her own (her issues make that impossible right now).

[breathemusic]

I really like the suggestion of having him pay a % of your current utility bills and looking at comparable rental costs in the area and using a % of that. If he has to give you a different amount every month for things like utilities, not only will it teach him a more realistic view of budgeting, but it will also make him more aware of the utilities he's using and potentially save you money. It just puts the whole "I should turn off this light so I don't have to pay so much on my next bill" idea into perspective.

It might also be useful to just have him join in on any other financial dealings that you have in your household. When it's time to pay property taxes, show him some of the paperwork and let him see what you have to deal with. Got some health insurance bills to go over? Discuss it with him.

My mother was never shy about discussing the family finances with my brother and I when we were growing up, and it really helped us early on to appreciate the need to properly manage our finances.

I think the fact that you required him to pay for his own vehicle expenses was a great start!

[riverwed070707]

You're assuming I'm dumb enough to fork it over to her when she's not responsible enough to handle it? Not going to happen. I don't care if I have to wait until she's 35, then I'll wait until she's 35. Yes, she knows the money is there for her. You do not know my daughter or her situation, so while I appreciate your opinion - in this case I feel strongly that I know what's the best approach for her. She is a VERY immature person for her age in many ways (has some psychological issues). I figure if the time never comes when I feel she's ready for it - at least I have it there to help her out when she will inevitably need it. I've also been putting her child support money in there (actually it just ended, but for the year before it ended I put it all in that account for her). She is very well aware of how expensive things are here. Hopefully someday she will have the independence to actually move out and experience that on her own (her issues make that impossible right now).

I'm not assuming anything about your intelligence, just questioning why you get to decide how she spends the money *she* earns. IMO if a kid is responsible enough to get a job then they get to decide what to blow it on. Charging rent to cover expenses for an adult in your house is fine -- a mandated savings plan based on a percentage of your income is controlling and, IMO, doesn't teach the skills needed to manage their own money, rather lets them know that mom will be there to bail them out if they get into trouble. Your kid, your rules I suppose. I guess it just rubs me the wrong way becuase it reminds me of something my mom would have done when I lived at home which is why I got the heck out of there at 17 and I turned out just fine without her peering over my shoulder.