A US-based couple has sparked a debate over their decision of charging their 19-year-old daughter rent to live at home. As per reports, Erika and Cody Archie from Gatesville asked their teenage daughter Kylee to pay $200 as rent every month. The couple claims the move was to teach their daughter lessons about financial responsibility and managing costs of living. The decision, however, has left social media users divided with some agreeing with the couple while the others expressing their views against it.
"Some people believe that it is important for young people to learn how to budget and manage their money, while others believe that parents should continue to support their children financially until they are ready to move out on their own," said Viral Bhatt, Founder of Money Mantra.
While culturally, India is much different when it comes to a parent-child relationship, most parents want their children to be financially responsible after they start working.
"This kind of unique approach (charging rent) may be appropriate in US culture. But, I don't see this happening much in India. Generally, this happens when parents have multiple houses," said Ravi Saraogi, Co-founder, Samasthiti Advisors.
Among the many common techniques that the parents in India use to teach their adult kids financial responsibility are asking or forcing them to buy a house, purchase an LIC policy from an agent they usually deal with for their policies, put bonus money in PPF, etc., according to Saraogi, who added that however, making their children buy a house is Indian parents' favourite approach to make their adult kids save and invest.
"More often than not, parents in India force their kids to buy a house after securing their first job by assuring that the down payment will be taken care of by them. This is to make sure that they invest in an asset as the young generation finds it difficult to save otherwise," added Saraogi.
However, the question is: is it the right way to teach adult children financial responsibility?
Well, the answer is both, 'yes' and 'no'.
For those who find it difficult to save and invest, this is a good technique as buying a house would mean committing a good chunk in investment at an early stage. However, it could work against those who are comfortable with their income and want to put a good amount in mutual funds or such investment options, as the liability towards a home loan can last for a minimum of 10-15 years, explained Saraogi.
"There are many different ways to teach financial responsibility, and the right approach will vary depending on the individual. Some parents may choose to give their children a monthly allowance and require them to keep track of their spending. Others may set up a system where their children have to pay for certain expenses, such as their own phone bill or car insurance," said Bhatt of Money Mantra.
Bhatt also lists some tips for teaching financial responsibility to adults in India:
Start by talking about money: It's important to normalize conversations about money and financial planning. Talk to your friends, family, and colleagues about your finances and how you're managing your money. This can help to break down the stigma around money and make it easier for people to talk about their financial situation.
Set up a budget: A budget is a great way to track your income and expenses. Once you know where your money is going, you can start to make changes to your spending habits. There are many different budgeting apps and tools available, so find one that works for you.
Pay off debt: If you have debt, make a plan to pay it off as quickly as possible. The less debt you have, the more money you'll have to save and invest.
Start saving: Even if you can only save a small amount each month, it's important to start saving for the future. This could include saving for a down payment on a house, retirement, etc.
Invest: Once you have some money saved, you can start to invest it. Investing can help you grow your money over time. There are many different types of investments available, so do your research and find one that's right for you.
Get help if you need it: If you're struggling to manage your finances, there are many resources available to help you. You can talk to a financial advisor, join a financial education class, or read books and articles about personal finance.