Helping Adult Children with a Big Expense: A Practical Guide

At a time when many Canadians are facing cost-of-living challenges, paying for life milestones can feel increasingly out of reach. To help young people cover major costs, many parents are stepping up to provide financial support.

While this help can be a meaningful and loving gift, it’s important to balance generosity with caution. If you’re a parent who’s planning to help a child with a significant purchase, here’s what you should know.

What’s Driving Parents to Step In

When creating financial plans for clients, the topic of helping adult children comes up often. Clients frequently reference wanting to help kids with their post-secondary education, a wedding, and (most commonly) a home purchase. 

Let’s focus for a moment on providing financial support for a home purchase. Even with strong incomes, many adult children struggle to save for a sufficient down payment. High housing prices in urban centres make it difficult to secure mortgages that allow prospective home buyers to keep monthly payments manageable. So, it’s no surprise that, according to this year’s Financial Stress Index, housing costs (including mortgage payments) remain major contributors to the financial strain Canadians are experiencing. 

Many of my clients were able to enter the housing market before real estate values surged. They want their children to enjoy the same financial stability and homeownership opportunities they did. Wanting to help is natural—but before providing support for major purchases like this, parents should look closely at their financial situations. 

Providing Support Without Overextending Yourself

It’s extremely important that parents who provide help do so without compromising their own financial security. Jumping in without doing due diligence can mean jeopardizing your own future. 

A comprehensive financial plan is key. One that’s built using conservative (lower) investment return assumptions can help ensure you won’t run out of money if things don’t go as planned—such as if inflation runs high, if there are rocky market conditions, or if you have a longer-than-expected lifespan.

The old saying rings true: put your own oxygen mask on first before helping others. When applied to finances, it means making sure your retirement and long-term goals are on track before extending support to children. 

Practical Tips for Helpful Parents

Supporting adult children financially can be deeply rewarding, but it’s important to approach it with clarity and intention. The following tips can help parents provide meaningful assistance while remaining financially secure themselves.

• Clarify the nature of support - Clearly distinguish between a gift and a loan. Having a written letter that outlines your intent can help reduce confusion and conflict later on.
• Formalize the loan terms - If the assistance you’re providing is in the form of a loan, establish repayment terms early on. Doing so will help you avoid misunderstandings later on.
• Focus on one-time help - Supporting children with a specific expense, such as a down payment or tuition, may be more sustainable. It may also allow you to more accurately gauge the overall impact of your assistance. In contrast, taking on ongoing costs can be riskier.

Thoughtful planning will ensure that your generosity doesn’t come at the expense of your own financial future. By setting clear expectations and ensuring your own financial stability first, you can provide support that benefits your loved ones without compromising your long-term goals. 

If you’re thinking of providing this type of financial support, a professional financial planner can help you assess your financial circumstances and determine next steps. To find a CFP professional or QAFP^® professional near you, visit the Find Your Financial Planner tool.

Kelly Ho, CFP, is Partner at DLD Financial Group Ltd. in Vancouver.