TORONTO – Baby boomers are putting themselves at financial risk by continuing to bail out their adult children financially, according to a new report.
The TD report, conducted by Environics Research, surveyed 2,155 Canadian parents who have adult children not attending school, and found that one-in-five were willing to put their own security and financial future in jeopardy to help their adult children.
The survey also found that 44 per cent of boomers have let children move back home rent free, 29 per cent have subsidized big purchases like a new car or computer, and 20 per cent helped pay off credit card or other debts.
John Tracy, a senior vice president at TD Canada Trust, warned that boomers offering to much financial support can put a serious strain on their retirement finances.
“Increasing post-secondary education costs and high property prices means adult children are relying more on their parents,” Tracy told Global News. “Boomer parents are trying to help their children maintain a certain quality of life, it’s not really about the necessities. What boomers need to be worried about is that they will be retiring in that 10-15 year period.”
Although talking about finances can be difficult for family members, it’s important to have the conversation sooner rather than later said social worker Gary Direnfeld.
“It’s about realistically appraising what a parent can provide without putting themselves at risk,” said Direnfeld. “It’s a difficult conversation. And there’s no such thing as a good time for difficult conversations, you just have to enter into them.”
Direnfeld warned that parents who continue to support a child into adulthood can put a strain on themselves as they transition to living on a fixed-income. They can also hinder a child from developing financial literacy skills.
“Here we have boomers, 55 and older, who are concerned about their adult children turning to them for financial support,” said Direnfeld. “Boomers have reached the end of their working lives while adults 20 to 30 years-old still have their working lives ahead of them.”
Direnfeld urges parents to talk to their adult children about financial planning as thousands of post-graduates are moving back home from college and university.
“I’m working with parents who have children who’ve never had a part-time job before. They don’t have any financial acumen,” said Direnfeld.
Conversations about money cannot only be difficult but can cause friction and animosity said relationship expert Debra McLeod.
“One of the first things I do is I find out where people are coming from,” said McLeod. “People can dig in their heels when it comes to money and become very value laden.”
McLeod’s advice is to get a financial planner involved in the conversation and offer a “wake-up call” for the parties involved, replacing the guilt parents feel about not supporting their child with the fear that they could end up having to sell their house.
“Parents have a responsibility to help their kids financially while they’re in school,” said McLeod. “But at some point the taps have to go off.”