‘Boomerang’ kids, as they are being called, are adult children who have returned to live at home. The boomerang effect is in full swing, as a growing number of millennials count on their parents and grandparents for financial support and a place to live. This has had a major effect on Canadian boomers and their ability to plan for retirement.
In 2011, almost 60 per cent of adults aged 20 to 24 and 25 per cent of 25 to 29 year–olds were living with their parents. This trend has been steadily increasing since 1981. One in four Canadian boomers admits to supporting their adult children or grandchildren.
For those ready to retire in 10 to 15 years, ensuring their adult children have a good start can derail their retirement plans. About 60 per cent of baby boomers feel that supporting their children into adulthood is preventing them from saving enough for their retirement and they feel financially stressed by the situation. Millennials are also aware of the financial stress they put on mom and dad, 43 per cent of millennials say they are willing to cut costs before asking for their parents’ help.
Wanting to provide help for children and grandchildren is natural, but it is important to balance this desire to help with one’s own future retirement goals. Although we might not be able to change the fact that adult children will be counting on their parents and grandparents more than ever before, there are ways to deal with the situation:
Set Some House Rules
Discuss how your kids can contribute to the household. How will you be splitting expenses and household duties? If you are covering the basics like their room and board, what expenses can your kids take on themselves? Will they be paying their own phone bill, car payments and recreational activities? Decide together what would work best for your household. It is important that everyone works together.
Retirement goals are still within reach. Speak with your financial planner and discuss your current situation. Do a goals-based assessment to determine what options are available to support your kids while keeping your retirement plans on track.
Discuss the Finances
Whether it is your daughter moving back in with her husband and grandbaby or your son who just graduated from college, it is important to discuss finances and ensure everyone is educated about fiscal responsibility. It may be a good idea to visit a financial advisor who has experience with multi-generational households, to help you out. It may be unclear how long the current living situation will last so it is important that everyone understands how to navigate their current circumstances and be prepared for self-sufficiency when the time comes.
Develop an action plan and set a few time lines. Identify a date when you will no longer be financially committed to each other. This date may change as time goes on but it is important to have a deadline established to develop detailed goals. As you approach this date, create mini-goals that will help you slowly free-up funds to divert towards saving for retirement. It is important not to ‘cut’ anyone off all at once – slowly allowing them to take on more financial responsibility can help to ease them into their independent and self-sufficient life.
Do you live in a multi-generational household? What approach do you take to ensure things run smoothly?