Your son in his mid-20s is living at home to save on the high rental rates in the city. Or your daughter is so straddled with student debt that even with her job, she needs to live at home while she pays off loans.
“It’s a much more common occurrence these days that adult children are at home later or need financial support, including to buy their own home,” says Jason Heath, managing director at Objective Financial Partners Inc. in Toronto. More people need to be better prepared for the costs associated with children living at home for a longer period of time.
Forty-two per cent of adults 20 to 29 were living with parents in 2011, up from 27 per cent in 1981. Half of Ontarians in their 20s live at home, according to Statistics Canada’s 2011 National Household Survey.
The StatCan survey also found more than half of those living with parents attended school in the previous nine months, and more than two-thirds were employed.
New graduates who are able to find good jobs still may not be able to afford housing in hot markets such as Toronto and Vancouver, says Heath. Understanding this and saving for some financial assistance could be a viable option.
“To what extent (parents) actually do help out may be based on ability to save as well as personal choices. Not every parent who can afford to pay for a child’s post-secondary education chooses to do so,” he says.
Parents should consider creative methods to aid their adult children financially, such as paid chores, Heath says. Or for someone who owns a corporation, one option could be to add a child as a shareholder and pay them tax-free dividends.
“There are no rules of thumb. But from experience, I can say that a safety net may not necessarily be that motivational,” he says.
Toronto real estate agent Mark Savel says he knows what living with parents is like, having spent a portion of his 20s living at home.
There are positive aspects, as relationships can be strengthened. “(It) came in handy for them when heavy chores needed to be done. For me, these years brought us closer together,” he says.
An agent at Sage Real Estate, Savel says planning in advance for adult children to be at home is key.
“Start with a basic budget to account for increased costs in food and utilities. Be realistic about the situation,” he says. “Have a plan in place to not only facilitate them while staying at home, but also to save for the eventual move-out.”
Savel bought a pre-construction property in his mid-20s, using a line of credit for the down payment and skipping nights out to save for mortgage payments.
“My parents trained me from the time I was receiving an allowance to always save a portion of my pay,” he says.
Like Heath, Savel has seen parents pursue innovative methods to help their kids enter the market.
“I’ve seen some parents purchase commercial properties with rental units above in anticipation of their children taking the upper floor,” Savel says.
Parents building a smaller house on their own property, so their married children in their 30s can take the original house, are some of the more far-out methods that Vancouver investment advisor Sophie Salcito has seen.
The Royal Bank’s latest quarterly report on housing affordability found Vancouver to be the least attainable market in the country, with rates set to worsen.
For a millennial couple between the ages of 25 and 34, buying a home at market price in the city will result in no discretionary income and $2,745 a year in debt, according to a recent report by credit union Vancity. Even buying a home in Toronto would result in some discretionary income, however minimal — $3,379.
As a result, finding new ways to speed up homeownership — such as handing over property pre-retirement – could become more common.
“That’s a way to effect a property transfer, their doing something earlier rather than later,” says Salcito, an advisor for Vancity.
In the effort towards owning substantial property, a client of Salcito’s engaged in a full on property switch — the parents moved into the condo of their thirty-something daughter and son-in-law, and they opted to take the parents’ pricey West Vancouver home.
Sixty-one per cent of Vancouver millennials aged 18 to 24 currently lived with parents, and 23 per cent of those aged 25 to 35 were still living at home, according to a May Vancity report.
Most millennials surveyed said they had considered leaving Metro Vancouver, but admitted they still planned to be living in the area in five years.
Some parents have withdrawn large amounts money to help their kids with a down payment, but that’s not always advisable, says Salcito.
“When the parents are thinking things through about setting boundaries, they should also consider their own needs as well, and try not to feel guilty,” she says.
For millennials, aspiring to a middle goal of living at home to save for a rental property if homeownership is far off could be a good option. But they should be sure to update parents on the plan, Salcito says.
“What we’re seeing here is that there’s going to be a shift of expectations for that demographic,” she says.
“It’s pointless to focus your energy on a negative discussion. You need to focus on what’s possible.”
Find out more about millennials as homebuyers here.
Infographic by: Tammy Leung