A new survey says one in four millennials is relying on their parents or grandparents to support them financially, and these “boomerang kids” have got their parents stressing over their own retirement plans. Rowena Chan, Senior Vice President and Head of Financial Planning at TD Wealth says there are ways to help your adult children without hurting your own retirement.
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Well, according to Stats Canada, if you're a Canadian in your 20s, chances are you're either still living with your parents or you've moved back home. In fact, a recent TD study says 4 in 10 Canadian millennials have moved back home and about a quarter of all Canadian millennials are being supported financially by either their parents or their grandparents. And that could well have a huge impact on baby boomers saving for their own retirement. So does that mean parents have to choose between their kids or their retirement? Earlier I spoke with Rowena Chan. She's senior vice president and head of financial planning at TD Wealth. And I asked her if she thought there was a trend emerging.
I'm really hearing a lot more about it, whether it's from my old families and friends or from the planners that I work with every day. In fact, we just did a survey and we learned that 62% of baby boomers said that they felt like they needed to help their adult children and it's impacting their retirement savings. And 58% said they are stressed about this.
And so I can share with you this example I just heard from my planners. This couple, they have two sons that just graduated from universities. And they both want to move back home because they do have aspiration about their careers. They want to go back to grad school. And they know that eventually they need to save for a down payment for a house. So they decided to go back home. And there goes the financial planning need for the parents even more.
Is this what it comes down to, I guess, for parents? I mean, it's a tough call. I mean, does it mean you have to choose between retiring at a reasonable age or do you help your kids and not retire for until you're 80?
Well, I don't think you need to choose one or the other if you are well-prepared. If you have the right conversation, you get the right help, you plan for it, then I think both can achieve their goals.
OK, that's why we have you here because you've actually brought a few points here of things on how to get ready and things to think about. So the first one you've got here is getting a game plan. What do you mean by that?
So what I meant is first of all you need to have the right conversations with your adult children, with the family members that may be impacted by this change. Go talk to a financial professional. Explain to them the situation. Take a financial snapshot about your current situation. What's your needs? What's your goal? And so once you have transparent conversation to set proper expectation, then you can set a plan.
Second one you have here-- and I love this one-- everyone can pitch in. Even though you might have somebody live at home, they're still contributing.
Yes, that's about setting expectations, looking at everybody's means and saying what's reasonable. If your adult children are not paying for room and board, for example, then maybe they can pay for cell phone bills, they can pay for gas money. And don't forget about household chores. That can be part of expectations, too.
The third one I think is probably a hard one to have, but it's facing the music and getting financially savvy, having the conversation about why is this happening.
Yes, well, I think at the example I quoted was two sons that really have goals. They know what they're saving for. But I'm not sure every situation is the same. So I encourage the adult children to talk to their parents as to why they want to move back home. Is it because they want a certain lifestyle? Or is that because there are some financial difficulties that are short-term? Or are they saving for something? And that is important. But no matter what the situation is, it is an opportunity for the children to get more financially savvy, to learn to be more financially responsible and independent.
Now, for the parents, they need to know there are lots of help out there. Go to a financial professional. Understand options available. And so that they can ensure their retirement is looked after.
Yeah, understand the tradeoffs, I guess, there, too.
Exactly.
The last one-- again, very important one-- is decide on an end date. You don't want your children retiring in your home. You want to make sure there's a date with this.
Yes, absolutely. There should be an end date. Treat it as another goal. Set small milestones. Make sure you're progressing well, you and your adult children. And if there are going to be any hiccups, go back to the financial professional and ensure that you go back on course.
Let me ask, any advice you might have on how to get these conversations started? I mean, you have kids. What recent conversations have you had with your kids?
So my son just got his first part-time job last year. And so we made a deal. So we talked about if he is willing to save 70% to 80% of his income towards a longer term goal, whether it's about a grad trip or whether it is to buy a car, I will subsidize him for his monthly spending. But if he chose to spend all of his income, then I'm not going to subsidize him. But the way I see it is-- I told my son when he's 19-- but the way I see it is it's never too early to have this type of conversation with your children. Talk about budgeting. Talk about savings. I think they can benefit from it in the long run.
Rowena, thanks very much.
My pleasure.
That was Rowena Chan. She's head of financial planning at TD Wealth. Now, if you'd like to watch this video over again, I'm going to tell you how you can find it. You can go to moneytalkgo.com/life. Type that in. It will take you to the site. We'll get that video, again, where you can watch if you want those tips again, about how to handle boomerang kids.
And guess what? We've got a whole lot more information all about retirement articles, about how to leave the cottage to your kids. It might be a little more complex than you think, things about, perhaps, the family bargain, how do you actually split up assets and think about these things. Just as an example, you may think that you want to give the cottage to one child or perhaps you've got some other assets to another, but there may be tax implications. So you really want to think about all these things and all the things maybe you don't know about retirement. A great site, it has everything there for you.
I'm really hearing a lot more about it, whether it's from my old families and friends or from the planners that I work with every day. In fact, we just did a survey and we learned that 62% of baby boomers said that they felt like they needed to help their adult children and it's impacting their retirement savings. And 58% said they are stressed about this.
And so I can share with you this example I just heard from my planners. This couple, they have two sons that just graduated from universities. And they both want to move back home because they do have aspiration about their careers. They want to go back to grad school. And they know that eventually they need to save for a down payment for a house. So they decided to go back home. And there goes the financial planning need for the parents even more.
Is this what it comes down to, I guess, for parents? I mean, it's a tough call. I mean, does it mean you have to choose between retiring at a reasonable age or do you help your kids and not retire for until you're 80?
Well, I don't think you need to choose one or the other if you are well-prepared. If you have the right conversation, you get the right help, you plan for it, then I think both can achieve their goals.
OK, that's why we have you here because you've actually brought a few points here of things on how to get ready and things to think about. So the first one you've got here is getting a game plan. What do you mean by that?
So what I meant is first of all you need to have the right conversations with your adult children, with the family members that may be impacted by this change. Go talk to a financial professional. Explain to them the situation. Take a financial snapshot about your current situation. What's your needs? What's your goal? And so once you have transparent conversation to set proper expectation, then you can set a plan.
Second one you have here-- and I love this one-- everyone can pitch in. Even though you might have somebody live at home, they're still contributing.
Yes, that's about setting expectations, looking at everybody's means and saying what's reasonable. If your adult children are not paying for room and board, for example, then maybe they can pay for cell phone bills, they can pay for gas money. And don't forget about household chores. That can be part of expectations, too.
The third one I think is probably a hard one to have, but it's facing the music and getting financially savvy, having the conversation about why is this happening.
Yes, well, I think at the example I quoted was two sons that really have goals. They know what they're saving for. But I'm not sure every situation is the same. So I encourage the adult children to talk to their parents as to why they want to move back home. Is it because they want a certain lifestyle? Or is that because there are some financial difficulties that are short-term? Or are they saving for something? And that is important. But no matter what the situation is, it is an opportunity for the children to get more financially savvy, to learn to be more financially responsible and independent.
Now, for the parents, they need to know there are lots of help out there. Go to a financial professional. Understand options available. And so that they can ensure their retirement is looked after.
Yeah, understand the tradeoffs, I guess, there, too.
Exactly.
The last one-- again, very important one-- is decide on an end date. You don't want your children retiring in your home. You want to make sure there's a date with this.
Yes, absolutely. There should be an end date. Treat it as another goal. Set small milestones. Make sure you're progressing well, you and your adult children. And if there are going to be any hiccups, go back to the financial professional and ensure that you go back on course.
Let me ask, any advice you might have on how to get these conversations started? I mean, you have kids. What recent conversations have you had with your kids?
So my son just got his first part-time job last year. And so we made a deal. So we talked about if he is willing to save 70% to 80% of his income towards a longer term goal, whether it's about a grad trip or whether it is to buy a car, I will subsidize him for his monthly spending. But if he chose to spend all of his income, then I'm not going to subsidize him. But the way I see it is-- I told my son when he's 19-- but the way I see it is it's never too early to have this type of conversation with your children. Talk about budgeting. Talk about savings. I think they can benefit from it in the long run.
Rowena, thanks very much.
My pleasure.
That was Rowena Chan. She's head of financial planning at TD Wealth. Now, if you'd like to watch this video over again, I'm going to tell you how you can find it. You can go to moneytalkgo.com/life. Type that in. It will take you to the site. We'll get that video, again, where you can watch if you want those tips again, about how to handle boomerang kids.
And guess what? We've got a whole lot more information all about retirement articles, about how to leave the cottage to your kids. It might be a little more complex than you think, things about, perhaps, the family bargain, how do you actually split up assets and think about these things. Just as an example, you may think that you want to give the cottage to one child or perhaps you've got some other assets to another, but there may be tax implications. So you really want to think about all these things and all the things maybe you don't know about retirement. A great site, it has everything there for you.
