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Supporting my Adult Kids is Impacting my Retirement Plan!

By Alexandra Macqueen, CFP

Published November 18, 2020 • 4 Min Read

The RBC Family Finances Survey shows that parents providing financial support to their adult children is becoming increasingly common.

  • More than 90% of parents with adult children between the ages of 18 and 35 provide financial support to their children,

  • Nearly half are still supporting children aged 30 to 35.1

While most of those parents surveyed say they’re happy to help their children financially, 3 in 10 say they’re worried about how their own retirement savings may be impacted — and another 3 in 10 are concerned they may have to delay their retirement.

Parents providing financial support to adult children may be motivated by the belief that their kids have few other options:

  • 85% say they believe their children are working towards becoming financially independent, but that it is difficult for younger adults to “make ends meet” today.

  • Half of parents surveyed say their children are struggling to become financially independent.

Parental support by the numbers

On average, parents supporting adult children say they’re spending just over $5,600 per year on kids over 18, dropping to just over $3,700 for children aged 30 to 35. Parents report these transfers are being used to help cover expenses associated with education, general living costs — such as for mortgages, rent, and cable bills — and cell phone bills.

Parents’ spend on children’s expenses: 2019 RBC Family Finances Survey

Education costs69%
Living expenses65%
Cell phone bills58%

Financial support is part of a shifting “new normal” for adult children

Parents providing financial support to adult children is also reflected in the increase in adult children continuing to live in their parent’s home after age 20. For example, Statistics Canada data shows that across the country, just over 3 in 10 young adults between the ages of 20 and 34 live with their parents, with nearly half still living at home in Toronto and Oshawa.

The Statistics Canada concludes this is, “most likely the result of a combination of economic realities, including the high cost of housing, and cultural norms that favour young adults living with their parents for longer.”

Assessing the impacts on parents’ financial plans

If you’re a parent providing financial support to a child over 18, you may share these concerns.

If that’s the case, one option would be to open a dialogue with your adult children to create a more formal structure to govern how your financial support is provided. For example, if you haven’t done so already, you may want to discuss limits on the amount of financial support you’re willing to provide, and the length of time over which you’re willing to provide it. You might consider establishing conditions, such as requiring a plan for your child to take steps to become financially self-sufficient over time. Ensuring there is clarity between parents and children about how support is provided can help reduce potential conflicts that may arise as you try to find harmony between helping your children, and meeting your own financial planning goals.

Taking care of your retirement readiness

The impact on your finances — including their retirement readiness — should not be overlooked. Just as your adult children’s need for financial support may have been made worse by the pandemic, your retirement plans may have shifted too. COVID-19 may have reshaped other parts of your financial plan as well, including a need or desire to provide support to aging parents.

Now may be a good time to review of your retirement plans. You can get specific and targeted advice about how to incorporate financial support into your financial plans, and find balance between all of your financial goals.

1. The 2019 RBC Family Finances Survey was conducted by Leger from October 26 to November 9, 2018 on behalf of RBC, through an online national survey of 1,004 Canadian parents (age 36 and older) who have millennial children (ages 18 to 35).

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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