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A reader got in touch recently to ask what do with a cash gift his children received from their grandparents.

“It was given with an eye to the future as a contribution towards a down payment,” he wrote. “What is the best thing to do with it since they are minors?”

It looks like a new frontier has been crossed in worrying about the affordability of houses. Grandparents are now giving kids money to buy houses a decade or more in the future.

The Canadian Real Estate Association reported this week that the cost of the average resale house in Canada was $688,208 in May, up 38.4 per cent on a year-over-year basis. Average prices in Vancouver and Toronto were above $1-million, Victoria was at $810,000 and Hamilton was at $879,000. We’ve seen numbers like this for months now and people are starting realize that housing costs are rising beyond the means of many young buyers.

We know parents and grandparents are commonly helping adult children buy houses. A recent report from Mortgage Professionals Canada found that about 33 per cent of first-time buyers in 2020 got some form of financial assistance from family members. This assistance is totally understandable because home ownership is a Canadian value and, in recent years, a proven wealth-builder. Parents and grandparents are worried that their kids and grandkids won’t be able to participate.

But a residential real estate market supported to a significant extent by family money is at odds with our image of home ownership as almost an entitlement for anyone who works hard. What happens to the young adults who aspire to own, but don’t have parents and grandparents with the means to help? It’s past time for politicians at every level to stop ignoring the soaring cost of homes and announce a housing strategy that address affordability. Build more houses, tax housing gains, boost property taxes – pick a solution and get moving.

As for the generous grandparents who want to help with house down payment money, one solution thought is to open in-trust accounts for their granddaughters at an online brokerage or through an adviser. The parents of these children could also open the account. Suggestion: Take advantage of the fact that the money won’t be needed for at least 12 to 15 years and invest in a growth-oriented balanced ETF.

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Ask Rob

Q: I have a question about my dad’s old age security (OAS) that I am unable to find a clear answer to. My dad immigrated to Canada in 2001. He turned 65 in 2021, meaning that he has been in Canada for 20 years, prior to the age of 65. My question is: If he waits until age 70 to avail OAS, will he get higher OAS because of his increased time in Canada, and because of delay in receiving OAS?

A: I asked for help on this one from Doug Runchey of DR Pensions Consulting, but first some background. If you do not qualify for full OAS, a partial pension is possible. “A partial monthly pension is earned at the rate of 1/40th of the full monthly pension for each year of residence in Canada after the age of 18,” a federal government website explains. Also, deferring OAS payments to age 70 from 65 gets you 36 per cent more in benefits.

Mr. Runchey: “You cannot ‘double-dip’ by counting the five-year period [from 65 to 70] as both additional residence and as the voluntary deferral increase. This means that the father could either choose 25/40ths (effectively a 25 per cent increase) or 20/40ths with a 36 per cent increase. In this case, counting the time as voluntary deferral gives the higher amount. Service Canada is supposed to automatically give him the greater of the two amounts.”

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

Wondering how much time and money you can save by paying down your mortgage? This calculator can help with answers.

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