Parenting in 2021 means cramming a house down payment for the kids into your retirement plan | #parenting


Every time there’s global financial upheaval, the obligations of parents toward their adult children grow.

Remember the “boomerang kids” of the 2010s? The economic disruptions caused by the global financial crisis caused them to move back home with their parents, who found themselves providing all kinds of financial support. Not just extra groceries for the household, but paying cellphone bills, subsidizing car insurance premiums, helping with student loans and more.

The COVID-19 pandemic is quietly adding a new burden on parents. It’s taking what was once a custom of helping your adult kids buy a house and turning it into a duty to provide gifts worth tens of thousands of dollars. Parents are asking, “How else will my kids get into a housing market that keeps getting more expensive all across the country?”

We may soon need a rewrite of the financial planning handbook for families. Parents used to struggle to save for retirement in the child-raising years, then pour it on when their kids became financially self-reliant. Adult children moving back home might have slowed this progression, but it wasn’t a potential difference-maker in the same way as financing a house down payment.

Can families afford the down payment help we’re seeing these days and a well-funded retirement? The financial planners of the country have their hands full trying to answer this question. Will we see parents using their registered retirement savings plans for themselves and devoting their tax-free savings accounts to a house down payment for their adult children?

The amount of money going into parental down payment gifts is rising at the same time as anxiety levels about saving for retirement. A recent survey of 300 Canadians by Natixis Investment Managers found a growing level of pessimism about retirement as a result of factors such as inflation, low interest rates and government debt.

There’s no question what a parent’s top saving priority should be – it’s retirement. Cover it off, nail it down. Then, find a way to help your kids if that’s what you want to do.

So says a personal finance guy. What parents are actually doing is responding to yet a new demand on their finances to support their kids.

Parental financial support has been part of home buying since forever, but it has now reached a tipping point. A recent CIBC Economics report said almost 30 per cent of first-time buyers have been getting gifts of money for down payments, and the average amount of help is $82,000. Back in 2015, around 20 per cent of buyers received an average $52,000.

The reason why more parents are handing more money to their adult children to buy homes is that there’s no other way for these young adults to get into the housing market right now. The pandemic accelerated an already fast pace of home price increases, far outstripping the ability of twenty- and thirtysomethings to save for a down payment.

Ten years ago, I wrote a book called How Not to Move Back in With Your Parents: The Young Person’s Complete Guide to Financial Empowerment. I recall a narrative back then of parents being burdened with the cost of having to support adult children who should, by the standards of past eras, been financially self-sufficient.

Now, we have parents willingly, even aggressively, committing to far larger financial commitments. The CIBC report found that in addition to the support given to first-time buyers, almost 9 per cent of buyers moving up in the market got help from parents.

Some of this parental support is simply an early inheritance. A high-net-worth couple might hand $82,000 to a child now rather than waiting decades and passing it along through their estate. But CIBC Economics has pegged the total amount of parental down payment support over the past year at $10-billion. Can this amount of money, paid to almost one in three buyers, come strictly from high-net-worth families?

The more likely explanation is that the demographic of parents helping with down payments is growing along with the amount of money given. It’s becoming normal to give your adult kids tens of thousands of dollars to buy a house. Where once you chipped in with down payment money, now you’re the main source of funds.

And then the next financial crisis will arrive. Don’t rule out this outcome: Retired parents helping to fund the retirement of their own kids.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to the Globe’s award-winning Stress Test podcast.



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