Maybe you have a strict household budget and are diligently saving for your children’s education and for your long-awaited retirement. But does your financial plan include support for your kids well after they reach the age of majority? Or helping your parents during their sunset years?
Increasingly, members of Canada’s baby boom generation are facing these ongoing family expenses. An Investors Group survey of Canadian boomers released Tuesday revealed that six-in-ten boomer parents are providing financial support to their adult children, to the tune of approximately $3,675 per year. On top of that, one-in-ten boomer parents are also providing some type of support to their aging parents.
Boomers’ budgets are getting squeezed as two trends converge: More young adults are spending time and money on post-secondary educations and the average life expectancy in North America is on the rise. Caught between supporting their children and their parents, some boomers are cutting back on their lifestyles, reducing their own retirement savings or accumulating debt to finance their obligations.
“Becoming a parent is a lifelong gift, but the payments are sometimes longer than anticipated. Boomers could face a cash crunch as they prepare for retirement,” says Jane Olshewski, manager of financial life planning for Investors Group.
Becoming a parent is a lifelong gift, but the payments are sometimes longer than anticipated. — Jane Olshewski, Investors Group
How should parents prepare to meet this financial challenge? Ms. Olshewski believes that for many people, it will be a fine balancing act. “It comes down to prioritizing what’s important.”
One couple I know, in their early 50s, has chosen to continue providing financial support to their three grown children, two of whom are married with children of their own.
“The truth of the matter is that I know the money we give is money well spent,” the father says. “The kids just know that they are getting their inheritance now when we are around.”
He hopes that when the time comes for retirement, he and his wife can draw on the equity in their home to support their own needs.
Theirs is not an uncommon situation. The majority of boomer parents surveyed don’t expect their children to be financially self-sufficient before the age of 25. Still, while it’s natural for parents to want to help their children get on their feet, Ms. Olshewski says, you can’t ignore your own needs.
“One way to cope with these responsibilities is to know how much assistance you can afford to give, and how much you need to take care of yourself,” she suggests. “Decide where to allocate your money to mitigate the cash crunch down the road.”
