The burden of supporting adult children
The number of adult children being financially supported by their parents in North America over the last decade has risen sharply. A report published by the CIBC Economics indicated that during the past year parents in Canada provided their adult children with more than $10 billion in down payments to purchase their first house. A decade or more of low interest rates, rising inflation, the pandemic, increased immigration and deflated wages have resulted in the soaring prices of housing. The impact of the desperate situation is experienced beyond the housing market and will likely have implications for generations to come.
The support typically provided by these parents reaches way beyond just finances as adult children are still living at home and are being subsidised by their parents. In Canada, just over one-third of young adults aged 18-34 live with their parents. This proportion is similar to what is observed in other western countries. In the US it is 34 per cent, Australia approximately 30 per cent and in the European Union it is almost 50 per cent. Adult children are still living with their parents because some never left home; others have returned from university and colleges. Some have attempted it on their own but had to return to base because they are precariously employed or are unemployed.
The high cost of living has forced these young adults to remain at home, however some socio-cultural factors influence some sub groups like the Italians and South Asians who account for a more sizable percentage of adults living at home. The question that needs to be answered is how long and how much more support can parents provide for their adult children? Children are expensive and are worth every cent even if they don’t express their appreciation. But when you realise that the expenses are not coming to an end by the time they are nearing their mid-twenties, at the point in time when you expect them to fully engage in the workforce, then you have to reevaluate your own future.
Thirty, 40 years ago The Boomers and Gen Xers were largely out of their parents’ houses; they got married, occupied their own apartment, had a steady job and started building up themselves. Clearly, times have changed and it is arguable that young adults over the last ten years have discovered it is a lot more difficult to get ahead. According to a recent study by Merrill Lynch and Age Wave, 79 per cent of parents in the US provide financial support to their 18-34 year old, adult children. In Canada, it is similar, it is estimated that parents spend $7,000-$10, 000 annually on their adult children. The financial support comes in various forms. Some parents defray their children’s expenses, others give money directly to them, while others provide ‘loans’ with no formal agreement for repayment.
It is admirable to be able to support your adult children financially if you are in a position to do so. However, it must be effected in such a way so as not to perpetuate the dependence of your adult children. There should be clear communications about expectations and should be undertaken with healthy and respectful boundaries implemented. Issuing or advancing money can be a sign of financial enabling which may lead to dependency syndrome on your children.
It is difficult to say no to your adult children who may be in need of financial support, whether directly or indirectly, but there comes a time when parents need to evaluate if this approach is in their best interest or the best interest of their adult children. Parents will need to determine how this will affect their financial health as they enter their senior years. If you provide financial support what effect will it have on your finances 10-15 years later? Will it impact your financial and other life goals, like retirement, or will this force you to defer your retirement plans to keep supporting these adults? In more instances today children are cashing in like the parable of the Prodigal son, they are claiming their share of the estate long before their parents retire or die and, to top it off, they are not moving out. They are securing their spaces in the basements of their parents’ homes.
Providing financial support is not an indication of how much you cherish your children. Make sure your children understand that you treasure and appreciate them and will support them, whether you do so financially or not. Providing financially for your adult children isn’t always healthy. While you may want to help, parents must make sure their needs are taken care of first. You can best help your children by staying healthy and active and being able to work as long as you possibly can. The best legacy that you can leave them is being a financial role model with great money habits. Every so often our children genuinely require assistance, and we as parents are happy and willing to assist, but this should not be done by jeopardising your own financial security. Otherwise, you will be setting the stage for your own dependence later in life.
Fernon Wilson is a Jamaican educator living in Canada
