Are your parents moving in? Here’s How to Split the Bills Fairly

The Squeeze

• The most fair and realistic way to split expenses in a multi-generational household is to divvy up costs equitably, based on everyone’s ability to pay, rather than what they consume or which costs they incur.
• Consider the value of household contributions, like childcare, cooking and cleaning, in the equation, and make sure everyone knows their role in the household.
• Don’t rob from your future to support family members in the present. Create a financial plan that lets you continue to plan for retirement and maintain emergency savings along with covering current expenses.

When you’re in the Sandwich Generation, cohabitating with your folks can be quite different from the first time around.

For one thing, it can mean sharing a household with three generations of people earning an income: your parents, you and your young adult children. 

For another, it will mean that you are the one running things. 

And finally, it will mean that you are not alone: A Pew Research Center survey finds that parents moving in with adult children is a trend on the rise: “14 percent of adults living in someone else’s household are a parent of the household head, up from 7 percent in 1995.”

Naturally, sharing a home with other adults means sharing expenses… somehow. How that looks for your family will be completely unique to your circumstances. There’s no one perfect or best way to split household expenses. But here are some factors to consider as you make the big move.

Monthly Expenses

Plan how you’ll cover these major household expenses with your new housemates.

Mortgage or Rent

Do you expect your parents to contribute to the cost of housing?

You might not worry about this cost if you were planning to live in the same house regardless of the added occupants. But if you’re staying in your home longer than planned or you move to a larger place to accommodate family members, you might want or need them to help cover the costs.

A few things to consider when splitting this cost:

• If you rent: If they’re staying with you long-term and you rent, you’ll probably have to add them to your lease. That makes all of you equally responsible for the payment, regardless of what you decide among yourselves. So get clear on the portion each of you will pay, so there aren’t any questions when rent comes due.
• If you own: If you’re paying a mortgage, will your parents help you cover the cost by paying rent to you? If they do, make sure you’re clear on the legalities and tax implications of playing landlord in your area.

Utilities

More people in the house is likely to mean using a little more electricity and water, and possibly changes to your heating and cooling usage, especially if some people will be in the home all day when it was previously vacant.

You might also bump up your cable or satellite package to ensure you’ve got the internet service and television channels everyone in the house needs to feel comfortable, stay connected and get their work done. You might also share a phone plan now that you’re all under one roof.

Beyond that, consider how you will tackle other utilities: Do you plan to split these bills evenly? Ask members of the household to chip in what they can? Have everyone pay you for whatever was added when they moved in?

Food and Toiletries

Everyone gets a snack attack. So how will you share meals and a communal food supply for everyone in the home? Or do you prefer to split this responsibility and have everyone buy their own food and handle their own meals — or something in between?

Like in any roommate situation, splitting the costs of food and household essentials — like toiletries and cleaning supplies — can get tricky. What if you’re the only one who ever remembers to buy laundry detergent? What if you agreed to split costs at the end of every month, but someone in the house buys a filet mignon to eat by themselves every week?

If parents or “boomerang kids” — adult children who have moved out and then returned— are moving into your existing home, you might be accustomed to just maintaining the household, including food for everyone. But those costs could quickly balloon when you add two or three or four more adults to the mix. 

This bill, probably more than any other, is the most likely to jump up as you add people to the house. Prepare your budget for that reality, and talk to your family members about fairly and realistically covering the new costs.

Entertainment and Shopping

Making non-necessities the responsibility of whoever wants them seems like a no-brainer. If an adult in your household wants a new outfit, toy, concert ticket or vacation, they should pay for it, right? 

You might want to rethink that, though. Parents on a fixed income may not be able to afford extras. Their financial challenges may even be one of the reasons they moved in in the first place. If you’ve agreed to be the majority breadwinner in the house and to support your parents or kids, does that mean they don’t get to enjoy luxuries (however big or small)? 

Your answer might be a plain “yes,” especially if your family budget is tight. 

But if you know you’ve got room for discretionary spending, talk with other household members about how much “fun money” everyone will have access to.

Health Care Costs

Your parents will qualify for Medicare once they’re 65, which will help the budget, but it still comes with out-of-pocket costs. Will they cover those, or do you need to add that cost to your budget?

If you’re acting as a caregiver for your parent(s), you could be eligible to receive payments from their life insurance, long-term care insurance, health insurance or VA benefits. Check what’s available to help you foot costs or lost income.

Home Improvements

Your kids’ stint in your home will probably be relatively short-term. But your parents could live with you for 20 or 30 years if you all agree on that arrangement. For homeowners, that means they’ll live with you through plenty of home-improvement projects and remodels. That could include:

• Fixes for basic wear and tear — which may come more frequently with more occupants
• General upgrades, like redecorating, remodeling and yard upgrades
• Additions for space or accessibility, like an extra bedroom, apartment/suite, wheelchair ramp or accessible bathroom fixtures

You might be happy and able to foot the bill for these costs, even if they’re costs you incur specifically to accommodate your parents. 

But if you can’t or don’t want to cover them alone, talk with your parents about ways they can contribute. They might have access to insurance benefits or federal-backed loans that can help cover upgrades for accessibility or medical needs, or they might be able to contribute to the repayment of home improvement loans you take out to cover the costs.

Household Contributions

Although it’s a major life change, you don’t have to think of your family member moving in as only a burden on your household. Think of the potential added value and savings they might bring with them, too.

For example, your parents might be able to babysit younger kids in the house, saving you a ton on childcare. The added hands might save you time by covering household chores, cooking, cleaning and more.

You could include these household contributions in your financial equations, even if you can’t put a definitive dollar amount on them. Some household members could be responsible for caring for the home, while others cover the costs.

Have a conversation about this — don’t let it be assumed! Everyone in the household should know their role to avoid resentment down the road.

Split Expenses Equitably, Not Equally

The question of how everyone in the household will contribute to expenses might be less about where the money’s going and more about where it’s coming from. You could divvy up costs based on the money each member of the household brings in.

Even if your parents are fully retired, they may have sources of income to draw on, so they might be able to contribute while not working. Their income could include:

• Social Security benefits (for themselves or a deceased spouse)
• Retirement account distributions
• VA benefits (for themselves or a deceased spouse)
• Life insurance

They may have high medical expenses or may be paying taxes on a Traditional IRA. Consider their fixed income and everyone’s ability to pay, then decide what you’ll each be responsible for.

Keep Planning for the Future

As you divvy up expenses, be careful not to put others’ financial needs in front of yours to your own detriment. As you take on responsibility for parents, keep building your emergency fund, planning for retirement and contributing to your health care.

Before bringing a new member into your home, look at your finances honestly to figure out what’s truly feasible for your family. If you can’t maintain your financial health while supporting another, consider other ways to work together to share or cut costs. You might move to an area with a lower cost of living or let your kids rely on student loans for college expenses.

The financial balancing act rarely leaves you with perfect choices, but by being careful to think long term you’ll avoid decisions that borrow from your future to meet everyone’s needs in the present.