Click here to read “How adult children are ruining their parents’ retirement plans” by Sunny Freeman – The Record.com, September 3, 2015.
Many parents are spending up to $500 a month to support adult children and it is eating into their retirement savings plans, a survey has found.
Two-thirds of respondents in a study commissioned by CIBC said their resources are being depleted by children aged 18 or older. These kids are no longer students, but continue to lean on their parents for financial support.
Nearly half of the parents said supporting their children has hampered their ability to save and 20 per cent said it has caused them to delay retirement. One in four said they are spending more than $500 a month to help cover expenses, including rent, groceries and cellphone bills.
CIBC’s online survey was conducted on Aug. 11 among 1,054 randomly selected Angus Reid Forum panellists who are Canadian parents financially supporting adult children.
“We have adult children, they’re over 18 years old, they’re theoretically able to work and they’re continuing to rely financially on their parents,” said Jamie Golombek, managing director of tax and estate planning at CIBC Wealth Advisory.
The results made him question whether enough people talk to their children about finances and budgeting — or with adult children about finding a job that may be less than ideal in order to contribute.
“It’s important that they understand that money is not unlimited, he said. “It’s one thing if they’re living at home, but in terms of paying their cellphone bills, paying their car payments, things like that, if they’re not working they really need to take some responsibility for this.”
Canadian nests have become less empty for several reasons, including a weak job market for post-secondary graduates, marriage postponement and the prevalence of intergenerational homes among recent immigrants.
About 42 per cent of twenty somethings lived at home in 2011, up 10 percentage points from two decades earlier, according to the latest Statistics Canada data.
Hannah Frazer, 23, is one of them. She recently landed her first job as a junior project manager at CIBC.
After graduating from Queen’s University in April 2014, she moved back to her parents’ Toronto home as she looked for a job in her chosen field.
They provide her with free room, board and groceries. Her parents also helped pay her cellphone bills and car insurance, but asked her to take those payments over when she was hired at the bank.
She plans to move out within the next year, but high rents have been a deterrent. She’s grateful her parents are giving her a head start.
“For me it made sense to stay home,” she said.
“I have a great relationship with my parents, I don’t have any particular reason to move out and that way I can save for the future.”
Frazer said aside from jokes about living with her when they’re older, her parents seem to want her to stay.
Christina Newberry moved home twice as an adult — first at 21 after she graduated from university and again at 29 when she was going through a divorce.
Now, she writes a survival guide for parents and adult children about returning to the nest.
The trend is rising because it’s becoming harder for new graduates to get jobs that allow them to support themselves, she said, while their standard-of-living expectations exceed dingy apartments and ramen noodles.
Often, adult children don’t realize the toll their expectations are taking on their parents’ finances — and that’s why open communication is key, she said.
“The millennial generation gets a bad rap, but I don’t think they’re intentionally harming their parents’ financial situation, they just haven’t thought about it.”
The most common type of financial support cited in the CIBC poll was free room and board, but respondents also reported helping their adult children in other ways, including with debt repayment, rent to live elsewhere and vehicle payments.
The survey results reflect the lived experience of retirees, many of whom are taking on debt to help their kids, said Susan Eng, vice-president of advocacy at the Canadian Association of Retired Persons.
“Times are bad. Their kids are not getting jobs, they can’t afford their first house and now they’ve moved back in,” she said.
“It goes the other way too. There are many working Canadians who have to look after their parents, so depending on the family circumstances it takes more than one generation to work through, and that’s a statement on the state of our economy.”
How parents help children
A CIBC survey found parents help adult children in many ways.
- 71 per cent offer free room and board.
- 47 per cent pay their groceries and other household expenses.
- 35 per cent cover cellphone bills.
- 23 per cent make monthly car payments and pay for other vehicle-related expenses
- 17 per cent subsidize rent so their adult kids can live elsewhere.
- 12 per cent help repay their loans and other debts.