Canadian parents are willing to help their children buy a home, even if that means it negatively affects their personal finances and postpones their own retirement.
A new leger poll commissioned by FP Canada, of 1,500 Canadian parents found that almost half (48 percent) of those parents with children under 18 say they plan to help their children get into the real estate market when the time comes.
The survey, called the ‘Housing Affordability Survey,’ found that the parents that do plan on assisting their children are doing so at the detriment of their own personal finances. Of those who said they would help their children, 39 percent expect that doing so will postpone their retirement.
The survey also found that one in four parents with children 18 and older have already helped their children with the purchase of their first home, although in this case most say their savings were not affected.
It’s not just buying a house parents are willing to fork out money for. Thirty-six percent of parents with children under 18 said they would help their children with rent, the numbers were similar for those with children 18 and older. And 35 percent of those parents said they have already helped their kids with rent
Why is this happening?
Real estate prices have skyrocketed in the last 10 years. According to the Canadian Real Estate Association home prices in Canada has almost doubled nationally. Those numbers are more dramatic in cities like Toronto and Vancouver. Added to this wages have, up until only recently, been stagnant. Canadian post-graduates are also leaving university and college in record levels of student debt. According to Statistics Canada, the average Canadian university graduate finishes school with more than $26,000 in student debt.
Cash rich boomers
On the other hand boomers, especially those who own real estate have the money to give their cash strapped children to buy a house. According to Strategic Insight between now and 2026, approximately $1 trillion of wealth will transfer from the baby boomer generation to their children. Many of those parents are tapping those funds now to help their children.
There is no doubt that any parent would want to help their children succeed. Whether it be by buying a house, helping them with tuition costs or paying down their debts. But parents should be aware when they help their children pay for big ticket items, like a house, they may be delaying their children’s financial experience. Often times we learn our most important personal finance lessons in our 20s when we rack up too much debt, or make purchases we later regret. By taking away the children’s ability to do that, parents may be doing their children a disservice.
According to the report older parents (55 or older) were more likely to agree they have assisted their children with the purchase of a home, so this shows that many might be waiting until their own children are older and wiser to money before they decide to help them financially. That may be the better move.
It’s important for parents to know their own finances are in order before they start to help others, even if they are your children. The reality is, if a person is struggling financially in retirement the first people they will turn to is their own children.
That also means that if you’ve recently had your first child – or are now considering your child’s future – plan ahead! The earlier you start a program to save for your children’s future, the better your results will be.