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The invisible costs of being an empty nester Add to ...

Michelle Wymer is enjoying the good life. She and her boyfriend just bought a new condo in Vancouver. As a sales representative and a forklift operator, they have an annual household income of about $170,000.

But when Ms. Wymer recently bought a dark grey Mazda3, her parents were the ones who forked over $5,000 for the down payment. And when she was stressing out about lingering student loans, they cut her a cheque for $10,000. Until last year, they would also pay for her flights to northern British Columbia, where they live.

"They've always tried to do whatever they can to help out," she says, adding that it's a common scenario among her group of friends.

"Parents today are very focused on setting their kids up so that they're in a good financial situation."

While financial help has trickled down the family tree for generations, the practice is growing, especially now that a wealthy bulge of baby boomers is so heartily embracing it.

"There's a great tendency towards helping adult children," says Keith Tongue, a senior director at Vancouver City Savings Credit Union. "That's the direction it's going."

They may not be the boomerang kids, living at home and socking away their salaries well into their 20s, but these young professionals aren't fully independent either.

It's just that the support is less visible and, for some, easier to conceal. Indeed, even some of the splashier markers of the good life, such as new cars and private-school tuition, are completely underwritten by mom and dad.

David Cork, an Ottawa-based Scotia Capital Inc. director and investment executive and co-author of The Pig and the Python: How to Prosper from the Aging Baby Boom, frequently sees evidence of multigenerational accounting.

"They don't like to tell you, but we see kids come in who are in their early 30s with a nice home and no mortgage," he says. "You think, 'I know they're doing well, but they seem to have gotten there rather quickly. Was there initial help?' "

But the financial planners and real estate agents who watch the cash flowing say the so-called "bank of ma and pa" may be more about generous parents than needy or spoiled adult children. Instead, many parents are responding to financial barriers they may not have faced in their 20s, from staggering student loans to pricey real estate.

In a recent Royal Bank of Canada poll of boomers with household income of more than $100,000, a majority expected to give financial help to their children while they were still alive. Only one in 10 said they were planning on giving nothing to them during their lifetime.

For many, real estate is the preferred way to say "I love you."

"They don't want to give you money for [a retirement savings]contribution. The home is the thing," Mr. Cork says. "It's the first big thing."

Though Kieran Thomas had been working for three years in banking, and saving money, there was no way the 25-year-old could afford even a modest condominium in Vancouver.

So his parents, who live in Trail, B.C., topped up his savings for a down payment and agreed to share the mortgage payments on the 500-square-foot, one-bedroom condo he bought in July. The average price for similar condos in his building is $270,000 to $310,000, he says.

"I would have had to wait until I was 30 or 35 before my first condo," he says. "My parents wanted me to be set up so that I could be successful in life without having burdens."

Other twentysomethings feel they have to resist their parents' generosity where they can. Tyson, a 25-year-old who works in the film and television industry in Calgary and asked that his last name not be included, is currently looking for a townhouse. Because he works freelance, he needs his parents, who have just rounded the age of 50, to co-sign the mortgage. They were willing to help him more, but he declined because he's not proud of his generation's cushy situation.

"I've seen a lot of young people who get everything given to them with no appreciation for it," he says. "I've seen a lot of kids whose houses were paid in full - they didn't even have a mortgage."

His real estate agent, Jared Chamberlain, who is 27, says he has seen parents buy themselves a new home and install their children in the original. He says he and his friends know they're lucky.

"We were brought up in a generation where we had lots. Our parents were brought up in a generation that didn't have as much. They want to provide us with more than they had."

Which is not to say that strings are not attached when it comes to financial help. Many boomer grandparents are showing up at private primary-school open houses to suss out exactly where their fees are going.

David Prashker, director of Leo Baeck, a Jewish day school in Toronto, says tax receipts indicate grandparents paid the tuition for only 20 students out of more than 500 at the school. But he estimates more could be offering partial or full financial assistance by offering funds directly to parents.

"Grandparents want to be part of their grandchildren's education," he says.

And his and other private and religious schools are reaching out to grandparents to better include them in activities - and in fundraising. One such recent event raised $8,000 for the school.

Many opinionated parents are also taking an active interest in the real estate choices of their kids, Toronto-based agent Brad Lamb says.

"If the [adult children]don't get the stamp of approval, the money's not forthcoming," he says. "We've seen situations where parents say, 'I'm not giving you money for that. That's not where I see you being.' Or, 'I don't see value in that.' "

Likewise, parents also need to be reminded of the freedom they may be losing in the transaction. Golfing in the Caribbean twice a year may not be compatible with providing down payments on their kids' homes or paying for their grandchildren's private school.

Mr. Thomas says he's well aware of his parents' sacrifice. Together, he and his parents - his dad, 67, a retired chemical engineer, and his mom, 61, a retired nurse - have agreed to renegotiate the arrangement every six months. He says this keeps him on a strict budget.

"There is the parental guilt factor, knowing I should watch what I buy and what I spent my money on," he says.

Ms. Wymer agrees. "I wouldn't want to go on a big vacation or something - it would feel disrespectful," she says, since accepting a chunk of cash "... may mean they can't do something they want to do or my dad isn't retiring."

Then again, Ms. Wymer says, her dad jokes, "that I'll have to support him in a few years."

*****

Sharing the wealth

Consider these tips from Royal Bank of Canada's Lee Anne Davies before you break the bank:

Do

Plan for unexpected events in your retirement planning process. Otherwise you may gift money to your children and risk not having it available for home renovations or other important purchases.

Understand the implications of co-owning a second home with your children. It could have a financial impact on your retirement plan if they can't carry their share of the costs and may also jeopardize your principal residence tax exemption.

Consider a registered education savings plan for your grandchildren: This helps to ensure that the money is put toward their education.

Don't

Underestimate the importance of communicating to all of your children, even if your decision is to financially assist one adult child at this time. These conversations can be awkward for parents, but keeping all of your children informed can help ensure fairness and avoid disagreements.

Sign any legal document without the review of an independent lawyer. You may want to assist with mortgage payments and share home ownership with your children, but today's family structures can complicate things. Consult your own lawyer (not your child's) to ensure that your interests are protected.

Tralee Pearce

With files from Wency Leung and Heather Sokoloff

 

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