Upvote:1
Although your sister is family, I think the two options have slightly different meanings. I would interpret "living with my family" as living with one or more family members in a situation in which you are not contributing economically towards rent and expenses. "Other- Living with my sister" could mean that you two share accommodation and you both contribute to paying rent.
All in all I think this question is aimed at providing information to determine your financial situation and possibly even your home ties - paying rent means that you have economic means to support yourself. Therefore, answer with what better represents your situation. Be honest and truthful and do not hesitate to add extra information to detail your situation.