The new (not so) empty nest: A guide to concerns, ideas and opportunities
As living costs rise, parents may be surprised to find themselves supporting adult children longer than they expected. How will you approach your empty nest years, and could it have an impact on your retirement?
Whether you’ve been looking forward to it or dreading it, the day your kids finally fly the coop can be an emotional one. The house suddenly feels a little too quiet and somehow your days feel less full than they did before. But are you really free?
After all, empty-nesting isn’t as simple as it used to be. You may find yourself supporting your children both in and out of the house for years to come. According to Statistics Canada, well over a third of adults aged 20–34 still live with their parents in 2023. 1 In the 1980s, that number was only around 21%. 2 Add in the kids who continue to depend on their parents for significant financial support and the difference from previous generations becomes even more stark. (As many as 91.5% of Canadian parents provide some form of financial assistance to their adult children according to an informal survey of Globe and Mail readers.) 3
Rather than taking the time to adjust to this new reality, however, Tannis Dawson, a High-Net-Worth Planner with TD Wealth says, “Parents tend to just go on with their lives without thinking about how their overall financial plan could be affected.”
Before you see your own expectations overtaken by reality, Dawson suggests that every empty nester — or even soon-to-be empty nesters — stop and ask themselves these financial questions.
If empty-nesting has changed, what does that mean for my finances?
“I had a client whose partner made good money, but she was still helping all three adult kids,” says Dawson. “I had to tell her that once her partner retires, she’ll no longer be able to fund the children. So, either he keeps working or something else has to give.”
This is all to say: If empty-nesting isn’t what you thought it would be, you’re not alone. Many parents continue to feel an obligation to support their children well past their 18th birthday. After all, rent is expensive, food and tuition costs are high and even a modest down payment can take nearly two decades to save for. 4
“For us, it all comes down to the high cost of housing,” says Don, a pre-retiree whose university-aged sons live with him and his wife in Toronto. “Even if our boys paid for everything, it would still pale in comparison to the financial aid we would have to eventually give them to purchase a home. Whatever money they can save now, it’s going to go to their housing down the line. So, making them fully support themselves when we have two empty bedrooms and food in the fridge…it just doesn’t make any sense.”
While generational guilt over sky-high costs (and particularly, the high cost of housing) is real for many people, Dawson says it’s important to be realistic about how much this financial support is costing you and how long it can reasonably continue. Then it’s time to have “the talk.”
Have you had “the talk” yet?
Having an open conversation with your kids about what your support will look like in the years to come can go a long way, says Dawson. And that goes for households where adult children are still living at home, have already moved out or are half-in, half-out.
In addition to the basics (rent, tuition, food etc.), these conversations should also include discussions about any large cash loans or gifts that may come in the future. For example, does your kid expect you to pay for their wedding? If someone wants to get a second degree, are you going to foot the bill? Will you help them out if they still spend like 12-year-olds and haven’t managed to save a cent? Will you be expected to contribute to a down payment on a house?
With an increasing number of parents helping their kids buy their first home, support that could cost hundreds of thousands of dollars, this kind of assistance calls for organization and extensive discussion. 5
“Talk to your kids and tell them what you’re willing to pay for and for how long. Whatever it is, you need to be up front with them so they can plan too,” says Dawson.
How does continued support affect my long-term plan and goals?
Once your family has a better understanding of what this continued support may look like, Dawson says the next step is to review and update your financial plan. “No matter what you want to do, it’s important that we look at what the associated expenses [of helping your kids] could be, and work those into the plan.” On occasion, Dawson says adjustments may have to be made.
“We account for all sorts of things when working through your plan, but some of the big ones are when you want to retire and inflation. From there, we can decide if your budget is still reasonable.”
For Don, incorporating financial support for his kids into his family’s financial plan was a no-brainer. “The more expensive housing gets, the more we benefit as homeowners…but the more this younger generation suffers,” he says. “So, it means not only do we have to help our kids a little bit, we might have to help them out a lot. I think that’s one of the big differences between now and 20 years ago.”
Is there an opportunity to save a little more?
For parents whose kids have moved out (or are somewhat financially independent), there may be a little more money to put aside for retirement and other personal goals. Without the latest “it” shoes to buy and expensive extra-curriculars to fund, you might even find you’re able to reach key goals sooner.
Just don’t assume these additional savings will appear automatically. According to a study conducted by the Centre for Retirement Research at Boston College, empty nesters in the U.S. only marginally increased their savings rate and not enough to improve their retirement outlook. 6 Among other conclusions, the authors of the study suggest that when children leave home, there may be a time lag before parenting expenses cease. If you believe you can save or spend a little more once the kids exit, a financial planner or advisor could help to highlight some opportunities.
Am I still on track to retire?
For many people, an empty nest can serve as a catalyst to get serious about retirement planning. It’s only natural — one phase of your life is ending, so you turn your attention to the next. Dawson says this instinct is a good one and suggests that regular retirement check-ins can help you stay on track. Among other things, you may want to revisit your pension plan, take a look at your Registered Retirement Savings Plan (RRSP) and review your post-retirement budget. You’ll also want to ensure any future spending plans that revolve around your kids after retirement are accounted for.
For example, if you were to give $30,000 to each of your two kids to go back to school or for a wedding, amounting to 5% of your retirement savings, how does that cut affect your plan? Would you get the funds from an early withdrawal from an RRSP or from a Home Equity Line of Credit? Does your decision have unintended tax consequences?
As for Don, he’s not worried about retirement just yet. For the time being, both he and his wife are happy to keep working and when that changes, they have a solid plan in place — one they review regularly. Ultimately though, Don says he’s willing to make any adjustments necessary to ensure his kids are OK: “As a parent, you do everything for your kids. At least that’s our attitude. So even if they didn’t get well-paying jobs right away, we would help them out. Within reason of course.”
While empty-nesting may have changed considerably over the years, it remains an important milestone deserving of special attention. Whether the transition is in the near future or already in full swing, it’s never too late to consider the impact of this significant change on your life and your finances.
“Plan, plan, plan,” says Dawson. “I sound like a broken record sometimes, but the importance of having a solid plan in place can’t be overstated. Things change. That’s normal. But your plan needs to reflect that change in order to be effective.”
- “Plateau in the share of young adults living with their parents from 2016 to 2021,” Statistics Canada, (last modified July 13, 2022) https://www150.statcan.gc.ca/n1/daily-quotidien/220713/g-a005-eng.htm. ↩
- “The Crowded Nest: Young adults at home,” Statistics Canada, Spring 1999, https://www150.statcan.gc.ca/n1/en/pub/11-008-x/1998004/article/4417-eng.pdf?st=hK59eNC_. ↩
- Rob Carrick, “Nine in 10 parents are helping their adult kids financially: Here’s how much they’re spending, why and where the money goes,” The Globe and Mail, April 10, 2023, https://www.theglobeandmail.com/investing/personal-finance/young-money/article-nine-in-10-parents-are-helping-their-adult-kids-financially-heres-how/. ↩
- Irene Galea, “It’s taking Canadians years longer to save for a down payment, data shows,” The Globe and Mail, July 8, 2022, https://www.theglobeandmail.com/business/article-saving-down-payment-real-estate/. ↩
- Rob Carrick, “These numbers show how the wealth of your parents is a deal-breaker for first-time home buyers,” The Globe and Mail, October 14, 2021, https://www.theglobeandmail.com/investing/personal-finance/article-these-numbers-show-how-the-wealth-of-your-parents-is-a-deal-breaker/. ↩
- “Empty-Nesters aren’t saving enough,” Center for Retirement Research at Boston College, January 19, 2016, https://crr.bc.edu/empty-nesters-arent-saving-enough/. ↩