The Bank of Mom and Dad is definitely up and running in Canada, a new survey suggests.
According to financial product comparison site Finder.com, two-thirds of Canadian parents are helping out their adult children with their finances, based on a study of 2,000 adults. Just under half (47.3 per cent) admit that their parents are helping them out. The help can range from small loans or cash gifts, all the way up to large purchases like a down payment on a home. Most parents (about 38 per cent) are either lending their kids money or handing out cash, followed by nearly a third who help pay or subsidize their rent (29.3 per cent). Just over one in five Canadian parents are helping out with significant purchases like vacations, post-secondary education costs, or buying a house.
David Blain, a Calgary-based retired consultant and former financial officer for oil and gas companies, said he and his wife have given money to three of their children for their down payments on houses. The amounts have varied depending on how much his kids needed, but he said he and his wife offered the help before it was even asked for. “I think the need was there, so we helped them as we saw the need. I think it was that simple,” he said.
“I think that’s true that in today’s economy, it’s pretty hard for children just to go out and buy a house on their own…. I don’t know what the next generation is going to do, because it’s vastly different, eh?”
Helping your kids financially is not something every parent can do, but Blain said he sees “no reason not to do it” so long as he and his wife can.
“My generation grew up in a very, very fortunate time. And it was easier to get jobs, and we got into good-paying jobs, and it’s a little more difficult now,” he said. Blain said he and his wife started giving their children money before they were retired, but have continued to dip into their savings to help. “But we also have to watch out for retirement as well.”
The largest share of Canadian parents (38.5 per cent) are like Blain, helping out their children once a year or less. Less than a third (29.2 per cent) help out several times a year, while 17.9 per cent help monthly and 5.7 per cent help weekly. Sometimes that money is just enough for adult children to feel financially secure. Calgary business analyst Emily Janz said her parents gave her $2,000 when she finished her degree as a financial safety net, so she wouldn’t have to worry about going into overdraft. She didn’t end up using the money, and has since paid them back. She and her husband paid off their approximately $50,000 in student loans in two years, and Janz is now debt-free.
Understandably parents want to give their children the best chance in life, but too many freebies can actually damage your kids’ long-term financial well-being. Angus Kidman, Finder.com
Janz said her parents’ generosity has had a different effect on her brother, who she said is in a “habitual back-and-forth” with her parents, of them lending him money and him paying them back, despite him making more money than them. “I think they’ve kind of realized that it doesn’t make any sense, and they’re just kind of at the end of their rope of being able to afford it,” she said. “They understand that it’s not good for them and it’s not good for him.”
Too many freebies can be damaging, expert Angus Kidman, Finder’s editor-in-chief, said teaching good money management is an essential skill.
“Understandably parents want to give their children the best chance in life, but too many freebies can actually damage your kids’ long-term financial well-being,” he said. “Among the adult children receiving help from their parents, 13.2 per cent say it’s because they struggle to manage their money, and 12.8 per cent say it’s because they’re in debt.
For those who need the help, a majority (58.3 per cent) of Canadians say they’re grateful to receive it — though it can also stir overwhelming feelings of guilt. Toronto journalist Deidre Olsen said she feels like a “constant burden financially” on her parents, who she said are pretty strapped for cash. “They’ve already worked so hard and done so much for me that it really hurts my soul and being to ask themselves to encumber and burden themselves more for me,” she said. I don’t think that they should, but I feel very fortunate to have parents that are willing to support me so much.
Two years ago, when Olsen had already given notice to her landlord that she was moving out, she was laid off from her job. Stuck with credit card bills to pay off that eventually went to collections, she had no way of paying first and last month’s rent on a new place to live. Her parents managed to lend her the money and allowed her to use their credit card for a month, which she said amounts to about $2,500. Olsen is also a student, and said her mother co-signed a “very large” bank loan for her, which she wouldn’t have been able to secure without her help. “So to ask [my parents] to take on more for me hurts,” she said. “I don’t think that they should, but I feel very fortunate to have parents that are willing to support me so much.”