It was a shock to Hayley Torio when her parents told her and her sister that they will soon be charged rent.
On top of her own daily expenses, which include car payments, gas and insurance, Ms. Torio will pay her parents starting in July while she resides at their home in Port Dover, Ont. She says the amount will start small but progressively increase until it reaches $500 a month.
The 22-year-old, who is a full-time social-media video editor and producer, says her parents decided to charge their children rent once they started working – in part because Ms. Torio’s grandparents did the same to her parents.
“It was very much out of the blue,” she said of her parents’ ask. “I was very overwhelmed.”
The rent puts pressure on Ms. Torio at a time when she had been saving $600 each month toward a down payment for a house she plans to buy with her boyfriend in Brantford, Ont. – a goal they aim to achieve some time in the next two years. Home listings in that city range from $324,900 to about $2-million on Realtor.ca.
While the latest Statistics Canada data shows young adults are slightly more likely to live with their parents than two decades ago, the pattern is not new. But with housing and renting costs, as well as the cost of living, soaring in recent years, many parents are trying to find a middle ground between financially supporting their children and empowering them to be “launched” into the real world.
And with Canadian household debt levels at record highs, some are struggling to bear the brunt of financial responsibility for their children into adulthood, especially considering their own retirement needs.
Striking the right balance can lead to challenging and emotional questions around money: Should parents charge rent and if so, how much? How involved should parents be in their adult children’s finances?
Out of the 960 respondents of a survey that ran in The Globe and Mail’s Carrick on Money newsletter on June 15, just over half of parents said their children pay rent, while 11 per cent said they contribute in other ways. Fifty-two per cent charge $500 or less a month and 27 per cent charge $501 to $1000. Just 2 per cent charge $1001 to $1,300, and roughly 2 per cent charge more than $1301.
About 42 per cent of those polled said the rent they charge is a symbolic amount, while 22 per cent said their kids contribute by paying utilities and other household expenses. Six per cent said they determined the rent by taking a percentage of their children’s salary, and 5 per cent said they based it on rental-market rates where they live.
Housing in Canada has never been more expensive. Average rents for purpose-built and condo apartments were $1,944 in June for Canadians, with one-bedroom rents averaging $1,770 and two-bedroom rents averaging $2,127, according to a report by Urbanation and Rentals.ca. One-bedroom rents rose 8.5 per cent in the last year, the report added.
When parents were asked in the Carrick on Money survey why they chose to charge rent, the main reason was to help their children budget for fixed expenses. Some parents said they are saving the money to give it back to their kids, and others said their financial situation requires their children’s help with costs.
And while living at home might conjure ideas of 20-somethings, adult children are living with parents much longer: 23 per cent of respondents said the age of the eldest child in their home was 31 or older.
The general advice from financial planners is to bring the children to the table when determining the terms of the rent arrangement.
“This conversation is not just a one and done deal on math and a per cent. … It is an ongoing emotional conversation that parents have with ‘How do I also get them to become financially fit going forward?’ ” said Zena Amundsen, a Regina-based certified financial planner in a Globe and Mail interview.
She says many of her clients are charging their children 30 per cent to 50 per cent of the rental-market value in their province and are encouraging them to save the remainder for future goals. That benchmark may be even higher for parents in financially vulnerable situations looking to offset the rising costs of variable-rate and fixed-rate mortgages.
One of Ms. Amundsen’s clients decided to charge the recommended gross debt service ratio, which is approximately 35 per cent of monthly income, to mirror a scenario for when their child would be eventually approved for a mortgage.
Meanwhile, financially secure parents who want to encourage their kids to contribute to household responsibilities may choose to offer a choice to perform chores instead of paying rent such as doing repairs or painting the house, Ms. Amundsen said.
Becky Western-Macfadyen, a financial coaching manager at Credit Canada, a counselling agency, generally advises parents to delegate certain bills to their children whenever possible. She acknowledged that financially vulnerable families may have to be flexible in an arrangement that works for both the parents and their children.
She added that the need to rely on adult children for help with rising housing costs is “becoming an unfortunate reality and necessity for many families.”
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