Parents are the “bank” of adult children

TORONTO – It’s the same all the world over. Wherever you go, parents are the “bank” of adult children. And Canadians do not behave differently. According to a new report, published by Global News (read the article here), the majority of Canadian retirees are financially supporting their adult children: this is Fidelity Investments Canada’s annual pension report for 2024, conducted in January on a sample of 2,000 Canadians (49% males, 51% females), with an average age of 62 years. 

Well, the report highlights that 59% of retirees report helping their adult children (non-students) both with daily expenses and with major items such as home purchases, weddings and even education savings for their own nephews . Additionally, 82% of retirees indicate that repayment is having a negative financial impact on them in retirement. But there’s more: for those who are not yet retired, the cost of living also impacts people’s ability to plan for retirement, as 43% of early retirees say the cost of living is delaying their planned retirement.

Similar results emerge from another report, by Stastistics Canada, entitled “Intergenerational housing results in Canada” (read it here) and published the day before yesterday. As CP24 writes (in an article you can read here), “f you were born in the 90s and own a home, there’s a good chance that you are financially partnered with a couple of people you know pretty well…”: which means that a lot of young real estate buyers they are “funded” by their parents. According to the report, in fact, more and more young homeowners between the ages of 20 and 30 are entering the real estate market by collaborating financially with their parents: in fact, data in hand, starting from 2021, 1 in 6 Canadian homeowners born in the 90s, owns his own house together with his parents.

Statistics Canada says the percentage is higher in more expensive urban markets, such as Toronto, Guelph, Abbotsford-Mission, Vancouver and Victoria. “In around 3 in 10 of these co-ownership situations, the adult child lives in the co-owned property and the parents live in another property they own, which may correspond to so-called mortgage ‘co-signing’ (the mortgage)”.

And again according to the Statistics Canada study, the children of homeowners have an easier time entering the real estate market than those whose parents did not own a home. The new data comes amid a housing crisis and affordability crisis that have made it more difficult, if not impossible, for young people to enter the housing market.

“Greater attention – explains Statistics Canada – has been given in recent years to the role of parental wealth in the home ownership aspirations of younger Canadians. Just as the intergenerational transmission of income inequality is of concern, an increasing reliance on the “Bank of Mom and Dad” raises questions about how inequalities in home ownership can be reproduced across generations. In this context, some have suggested that a “Great Wealth Transfer” is underway, as baby boomers and other older generations tap into accumulated housing wealth to help their children and grandchildren enter the housing market”. Long life to grandparents/parents.

Photo by Tierra Mallorca on Unsplash