When Your Child Moves Out

Living on one's own is a natural part of growing up. Some kids put off the day of reckoning as long as possible, and some don't leave until they get married. Others stay at home for years—well into their 30s—because they like the conveniences you provide and don't want to live in the accommodations their wages can pay for. Kids who have gone off to college and then returned home to live are called “boomerang kids.”

Other kids are chomping at the bit to fly the coop. If your child has lived away at school, he already has had a taste of independence. He may be eager to move out on his own.

At some point, however, most kids clear out their closets for good. It's a big step, and an expensive one as well. Make sure that your child knows what it takes to live on his own and that he prepares accordingly.

He needs to know two things concerning what it costs to live on his own:

1. The initial outlays he'll probably have to make
2. The ongoing or monthly bills he'll have to pay

Knowing what it costs to move out will allow him to plan ahead so that he can start off on a sound financial footing.

First Things First

Moving out isn't as easy from a financial perspective as it may seem. It may take time and planning to be able to take the big step. Here's a listing of some initial costs that your child must have the cash to cover if she plans to move out on her own:

• Lease security deposit. When she rents an apartment, generally she's required to pay not only the first month's rent, but also another amount equaling one or two months' rent. This is called a security deposit. For example, if her monthly rent is $500 and she's required to make a two-month security deposit, she'll have to come up with $1,500 to sign the lease ($500 for the first month's rent, plus $1,000 for the security deposit).
• Broker or rental agent's fee. In some places, rentals are hard to come by. Currently, New York, Boston, and San Francisco are experiencing new zero vacancy rates, which means that there aren't many apartments for rent. Your child may have to use an agent to help her find a place. An agent may charge a fee equal to one to two months' rent, or a percentage of the annual rent (such as 15 percent). Obviously, if your child can find a home without using an agent, she's ahead of the game because she can save on this expense. But if she wants or needs to live in a tight rental market, she may have no choice.
• Utility deposits. Some utility companies, such as the telephone company or the electric company, may require a deposit before starting your service. This is especially true if your child has never used the utility before and so has no track record of making payments on time.
• Moving costs. If she has a lot of things to move from your home to her own place and she doesn't have a truck she can borrow, she'll probably have to incur some moving expenses. She may not need to pay a professional mover, but she may have to rent a truck or a van to carry her things. To rent a truck or van, she'll have to show a major credit card. In some locations, she must be over a certain age to rent a vehicle.
• Fix-up costs. Generally, a landlord paints an apartment before it is rented. In some places, however, fix-up is up to the tenant. (Some landlords may, in fact, reduce the rent if a tenant agrees to fix up the place.) Before your child invests any serious money into her place, though, make sure that she knows what she can and cannot do. Check the lease for restrictions on papering, putting up walls, or making any structural alterations. (She may be able to do it if she agrees to put the place back the way she found it when she moves.)

Making a Budget

The fact that your child has a job and wants to live independently is great, but he had better know how much he can afford to pay for rent and other expenses in light of his current income. It's not a good idea to plan on the basis of anticipated raises, job changes, or other unknowns.

By now, your child may have experience in making a budget: He may have done so as early as the day he first started getting an allowance. If he doesn't yet feel confident about this skill, he might consider taking an adult education class in his area (for example, the Learning Annex in New York City or the Boston Center for Adult Education in Boston). He can ask at his local library about such programs in the area.

Once he actually has made the transition into his new home, he should be prepared for ongoing costs of living on his own. He should make a budget that includes these items:

• Monthly rent. How much rent can he afford to pay? It's usually suggested that rent should be no more than one-quarter to one-third of monthly take-home pay. However, in high-rent cities, such as New York, most young people starting out may have to pay a greater portion of their income for housing. Generally, rent is due by the first of the month, but the schedule can have another due date. Make sure that he knows when he must pay the rent each month.
• Utilities. To keep the place running, your child will have to pay certain basic bills each month. These include bills from the electric company (he may also have to pay a gas company) and the telephone company. However, he may want to have other services if he can afford them, especially if he's used to having them in your home. For example, he may want cable TV or an online service for his computer (to receive e-mail and access the Internet). This, too, costs money each month. For instance, AOL's unlimited monthly use cost is $9.95.
• Insurance. While the law doesn't require him to have insurance, he should protect his property from theft or damage and should protect himself from claims in case someone is injured in his home. To cover these contingencies, he'll need to pay for tenant's insurance. Generally, this is an annual bill that runs only a few hundred dollars or less. A tenant's policy is a form of homeowner's insurance, and the size of the premiums depend in part on how much property—from his computer and stereo, to furniture and more—your child has in his home. He'll be glad he paid for coverage if a storm or fire ravages his apartment and destroys his belongings.
• Living expenses. In addition to the bills he must pay, he'll also have to budget for food, personal items, transportation (car payments, gas, car insurance, and bus, subway, and taxi fares), entertainment, and other costs of daily living.

It's helpful if your child puts this information together, along with other expenses, by making a monthly budget. He can use the following chart for this purpose.

Excerpted from The Complete Idiot's Guide to Money-Smart Kids © 1999 by Barbara Weltman. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

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