With the high cost of living and lack of jobs, young adults may need to remain at home longer than anticipated.RUSSELLTATEdotCOM/iStockPhoto / Getty Images
Many clients who want to retire have found a major stumbling block – their adult kids.
Last month’s youth unemployment for those under 24 is at 14.6 per cent, the highest rate since 2010, according to Statistics Canada. Almost half of young adults aged 20 to 29 lived with at least one parent in 2021, according to Statistics Canada data.
Furthermore, a Toronto-Dominion Bank study found that 57 per cent of parents surveyed expect to support their adult children financially but worry about their ability to do so.
In some cases, supporting adult kids well into their 20s and perhaps 30s is not something parents ever considered. But with the high cost of living, housing costs, stagnant incomes and lack of jobs, young adults may need to remain at home longer than anticipated.
Children in their 20s “are like the new teenagers,” says Zael Miransky, president and certified financial planner (CFP) at MCO Private Wealth in Richmond Hill, Ont. “Almost nobody is going to be out of the house at that age, and almost everybody that age is coming back home [after postsecondary education] for a while.”
Crystal Kelly, CFP at Amani Financial Inc. in Edmonton, calls the non-empty nest a changing reality for many Canadian parents. She says adult kids staying at home longer is a fact of life for many of her clients and friends – and for her personally. One of her kids attends university and lives at home.
She has adjusted parents’ financial plans with the assumption that kids will be at home until age 24. But given the economy, she wonders whether she should increase that age assumption even further.
“Clients often underestimate household expenses, and they don’t see how their children increase their monthly expenses,” Ms. Kelly says, noting that as kids get older, they require more space and use up more things around the house.
The issue is multifaceted. Statistics Canada notes there are more than 440,000 multigenerational households in Canada, and that number is growing, whether due to economic necessity or desire.
Ms. Kelly, who is Indigenous, says different generations living under the same roof is welcome in many cultures, where the kid launches when they are ready. In Indigenous communities in particular, she says, households are seen as shared economies.
“Families live together [and] share household expenses versus everyone living separately and duplicating those,” she explains. “There’s this sense of families thriving together based on their individual capacity. It’s not seen as a sign of failure to launch necessarily.”
But those in Ms. Kelly’s personal circle and her clients want to see their kids become financially secure.
“There’s some level of frustration but also understanding of the circumstances,” she says. “The frustration is more in not knowing what to do.”
Mr. Miransky says parents should empathize with their adult kids, but setting financial boundaries is paramount. He advises parents to charge them rent. He says if there’s no financial hardship, the money could go back to the adult kid once they move out as a generational gift.
Some of his clients just became accustomed to footing the bill for everything concerning their kids and never stopped, he says, and no discussion about expectations ever took place.
It’s something Boedey Vaeth, wealth associate with the Zentner Wealth Advisory Group at National Bank Financial Wealth Management in Winnipeg, notices with his clients’ families.
He says adult kids may have full-time jobs while living at home, but they’re not discussing how much they’re saving, their ultimate goals, and whether they’re on track.
“We go through what they should be putting away based on their goals,” he says. “Without that, they might accrue some bad spending habits. You don’t want to have their expenses creep up so it hinders their cash flow.”
Mr. Vaeth also sees some parents compromising their own retirement savings to support their kids. He cautions that the older the parent, the more likely their retirement may be delayed as there’s less catch-up time to make up the investment shortfall.
Kids living at home for longer is also affecting parents’ inheritances. Ben McCabe, founder and chief executive officer of reverse mortgage company Bloom Finance Company Ltd. in Toronto, says more parents want to accelerate that process.
So far this year, Mr. McCabe says there’s a 30-per-cent uptick for Bloom’s reverse mortgages, partly because of parents freeing up extra money for their kids.
His company’s data show Canadians aged 55 to 63 with higher levels of secured debt.
“They’re feeling the pinch. They might have aging parents who they are helping, and they’re still supporting their own kids,” he says.
Ms. Kelly says the lack of an empty nest is a huge shift for some parents and something advisors need to keep on their radar.
“If it takes your child longer to get a job, how does that affect their financial plan?” she says. “Advisors are probably not talking about these issues as much as we should be. And, frankly, clients may not have thought about them much either.”
That is, not until they’re in it.