By Kelley Keehn
Financial Planning Standards Council
Back in 2007, I sat down with Rob Carrick from The Globe and Mail to discuss a story he was working on about the cost of having children, just as my latest book at the time, The Prosperity Factor for Kids, was set to hit bookshelves.
Mr. Carrick started the article with, “If you’d like to wreck your finances, have a baby.” Of course, as later stated, having a child is the greatest job you can take on. But there is a major cost.
Back then, the estimate to raise a child to age 18 was around $167,000. Today, estimates come in over $243,000. And that’s before university. Plus, what Rob and I didn’t discuss all those years ago, but is on the mind of many these days, is helping millennials move out and stay out of the house – and, gasp, even helping them buy their first homes!
Failure to launch
So many parents feel the pressure to go far beyond what past generations might have thought was adequate. But can they – and should they – assist their adult children financially? This is what the Financial Planning Standards Council sought to shed light on in its Children and Financial Dependence survey. The results? Thirty-eight per cent of parents say their millennial children are still financially dependent on them, while one-third said those big kids are causing a financial strain.
More surprising was that of parents assisting with their millennial kids’ post-secondary costs, 33 per cent reported they will have to postpone their retirement and 32 per cent say it’s preventing them from paying off their debt.
As FPSC’s Consumer Advocate, I conducted over 40 media interviews across Canada on the survey results, and was surprised by how much this topic struck a chord with hosts, viewers and listeners across the country. They called in, emailed and tweeted about the expectations and strains they’re feeling.
Yet, many parents, whether their future will be secure or not, may decide to help their adult children. If you’re in this camp, how will you do it? Sell a stock, take funds out of your RRSP or maybe even consider a line of credit on your home? Tough, complicated questions to be sure!
What should parents be cautious about?
Saskatoon-based Certified Financial Planner® professional, CPA and CFA, Jordan Wilson with Wilson Wealth Management believes there are three interconnected issues the survey brings to light. “The first issue is a lack of education among the parents – a lack of preparedness financially. The second is, where do young adults learn their behaviours? Mainly from the parents. So, if the parents aren’t prepared themselves, how can they pass good habits on to their kids? And the third is culture: it’s easy to give a hand-out to the kids or you do so out of guilt. And if they expect that support, maybe they’re a little bit less hard-working themselves?”
What can you do?
Dawn Hawley, CFP®, Fellow of FPSCTM, with the Angus Watt Advisory Group out of Edmonton believes these findings offer the opportunity for you to “make it a family affair. Encourage adult children to accompany their parents into financial planning meetings because the survey certainly illustrates the need for greater financial planning education. We should also encourage the subject of financial planning in our school systems – children and future generations will benefit from planning and how it can improve their financial well-being going forward.”
Ms. Hawley believes that planners need “to be cognizant of the longer-term financial commitments parents choose to make for their children. For example, illustrating to clients how allocating more funds to children for education and home purchases can significantly delay retirement and retirement income for the parents.”
Parents need to remember the sage advice offered by flight attendants at the beginning of every flight: in the event of an emergency, don your own mask first!
But when it comes to putting your long-term needs ahead of your kids’ short-term desires, that can be tough advice to follow.
Consider bringing in a pro to help you navigate these difficult family discussions, help you crunch the numbers and, if you do agree to help, figure out the best plan for all of you.
To find a CFP professional who can help you determine if and how you can help your adult children, use our Find Your Planner tool.
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For more on how to navigate tough financial discussions with family, read How to have "that talk" about money with your spouse and family and 4 tips for financial harmony as a couple and watch Loaning money to your children.