Sunday, June 26, 2022

Should my son share bills with friends under different names or should they be in the same name?

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“There’s no single right way to pay those bills in a shared home, but it’s important to think about how to split the payments fairly.”

My son is a sophomore and is moving into a house with friends. He wants to know if he should split bills with friends into separate names or should they all be in the same name?

Dear Reena,

Reena Sewraz, Senior Money Editor at The? who’s stepping in for Jenny Ross this week says…

It can be difficult figuring out how to share the responsibility of paying bills with new friends you’ve just made in halls or on your class, but it’s important to have your son start the discussion because the Decisions far beyond could have long-lasting consequences for him university.

Rent for the majority of private student residence shares does not include utility bills such as gas, electricity, water, a television license or broadband (if everyone in the household is full-time students, they are exempt from council tax). These need to be set up with a named account holder and usually a bank account for direct debit payments when your son and friends move in.

There is no single correct way to organize the payment of those bills in a shared home, but it’s important to think about how to split the payments fairly while ensuring that all bills are paid on time and everyone is at risk, that he enters is satisfied.

One option is to have a roommate put all bills in their name and everyone wire the monthly debt into their accounts. This might seem like the simplest solution, but it means a person gets the rewards of building a credit history (some utilities do report to credit bureaus), but also takes on the risks if things go wrong.

It is important to remember that whoever is on the bill must pay the entire amount. So if someone fails to pay their share and no one else can cover it, the account may default. This results in a default in the account holder’s credit history, which can last for up to six years and can affect their ability to secure further rent or credit such as a mortgage in the future.

One way to avoid one person taking on all the risk and reward is to see if the bills can be set up with multiple account holders. This way, each of the account holders has an incentive to pay the bill on time as they could be hounded to pay and the impact (positive or negative) on credit reports is shared.

If setting up an account with multiple account holders isn’t an option, they could instead handle one or two bills each. A shared spreadsheet can help keep them organized, or they could try a free bill-splitting app that does all the math for them. For example, Splitwise lets you request payments with groups of friends, add due dates and clarify what’s owed – there’s little point in sending someone £10 for water bills when they owe you £11 for gas and electricity – £1 will do.

After deciding which names to put on the bills, some groups may find that they set up a joint account where all bill payments are paid through an easier bill-sharing method, as it reduces the hassle of paying each other back. However, a joint account should only be opened with people you really trust.

A joint account can create a financial connection to your credit report, and since everyone has equal access to the funds, there’s a chance a roommate will dip into the cash and not replenish it, leaving the group short for upcoming payments. Setting up a standing order for each other’s accounts might be a better solution.

Student budgets are tight and the last thing your son wants is to fight over money with roommates. Having an honest conversation early on can make sure everyone knows where they stand and don’t take anyone for granted.

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