Should Parents Charge Rent For Their Adult Gen Z Kids?

Moving out on your own used to be the pinnacle of successfully entering adulthood. But between the cost-of-living crisis and mounting student debt, Gen Z is flipping the script on that tradition. Nearly 30% of Gen Zers between the ages of 18 and 25 still live at home with parents or relatives, according to a Credit Karma survey.

Furthermore, a MagnifyMoney survey revealed that 67% of Gen Z respondents receive some sort of financial support from their parents (compared to 28% of millennials.) It makes sense considering many Gen Zers are still in college. The ones lucky enough to have parents with the means and will to assist are benefiting from support with tuition, rent-free housing, or help to pay bills.

Before jumping to the conclusion that Gen Zers need to become more financially independent, it’s important to consider that they’re coming of age in very different conditions than previous generations. Moves like moving back home to pay down debt or save for a downpayment are less taboo and more common these days.

But what about the parents in all of this? Are they sacrificing their retirement and working longer for the sake of their children’s future?

Why is Gen Z moving in with their parents?

“Boomerang kids” are young adults who move back to their parent’s homes after previously living independently or away from home for some time. So why is this happening?

First, there’s the hope of being able to buy a home one day. Median home prices increased 121% nationwide since 1960, but median household income only increased 29%, according to a Clever report. For the often unemployed Gen Z, it’s a lose-lose in terms of being able to save to buy a home, and things are only going to get worse. Moving back home can provide a way out of this vicious cycle.

Paying down debt is another common reason for moving back home. A LendingTree study showed that most of the young adults who moved in with their parents during the pandemic did so to clear debt (39%). The second most common reason for returning home was saving up for a home down payment (31% of respondents). Regardless of the generation, another LendingTree study conducted in 2021 revealed that credit card debt is the most common non-mortgage debt that people carry. Consolidating their credit card debt through strategies like balance transfers or personal loans can provide them with the much needed financial breakthrough. For some people, moving back in with their parents is the only way to get out of debt.

Check out our infographic on why Gen Zers are living with their parents.

But It’s Not Easy for Parents Either

The situation involves sacrifices on the parental side. As a result of their new roommates,  parents of Gen Zers are delaying their retirement. A Credello survey found that 42% of parents who contributed to their children’s higher education either partially or completely said it made saving difficult.

A study by the National Endowment for Financial Education (NEFE) showed that 26% of parents who allow their adult children to live with them had to take on additional debt, while 13% of them put off buying a home of their own or taking a vacation. Some parents (7%) even had to delay retirement to help their kids out.

If you’re a parent, it’s important to consider what you’re getting into when allowing your adult kid to live with you rent-free.

So, should parents charge rent for their kids?

Some people strongly disagree with these displays of parental kindness in the face of economic instability. Around 57% of people surveyed by Newsweek said that a 20-something moving back home should pay rent even if their parents don’t need the money.

Perhaps there’s a sliver of truth to it if living back home becomes a comfortable safety net that enables you not to take ownership of your financial future. But then some parents get stuck with permanent roommates who have no intention of living the comfort of a rent-free lifestyle.

Bottom Line

In some cultures, it’s normal to live with your parents. And in the face of the economy we live in, it’s also understandable to want to leverage generational wealth to get a leg up – if you have the privilege to do so. That said, it’s important to consider the impact on parents who also have to retire in an increasingly uncertain world.