The Boomerang Effect – Retirement After Kids Return Home
August 18, 2017Living in Retirement
According to a recent TD survey, the boomerang effect is in full swing. In fact, almost 60 per cent of young adults ages 20 to 24 were living with their parents in 2011, according to the most recent census data, while one quarter of 25- to-29-year-olds were also living with their parents that year.
And Statistics Canada says the trend has been steadily increasing since 1981.
One in four Canadian boomers admits to supporting their adult children or grandchildren, says the TD study. Parents who are preparing to retire want to ensure their children have a good start while they work towards paying down student loans and saving for a home of their own. This assistance can come at a cost to the parents but it is important to remember to balance retirement goals with any family contributions you make.
The trend is not going unnoticed by boomers’ children, either. Almost half (44 per cent) of millennials report that they’re fully aware of the financial stress the situation places on mom and dad, with 43 per cent of millennials saying they are willing to cut costs before asking for their parents’ help.
Some tips to help parents and kids coping with the “boomerang” effect:
It is important to understand that retirement goals are still within reach. Meeting with a Financial Representative and doing a complete financial assessment is key to determining what the options might be for parents who are supporting their kids while keeping their retirement plans on track.
Negotiate the return
Discuss how everyone can contribute to the household budget and operations. For example, parents may be able to cover basics such as room and board, but expenses such as cellphone bills, car payments and recreational activities could be covered by the kids. Also, consider having everyone pitch in to the costs of running the day-to-day operations and dividing the household chores.
Prepare to relaunch
Whether it’s a newly married son and his spouse and child, or a daughter who recently graduated and has moved back home, there are plenty of opportunities to educate all family members on the importance of being fiscally responsible and working toward financial independence. Everyone should join in the financial conversations to discuss how to navigate their current circumstances and establish good financial habits. Use a Financial Representative who has experience working with multi-generational family dynamics.
Decide when to release
As everyone maps out their action plans, identify a date when you will no longer be financially committed to each other.
As you approach this date, set up a series of mini-goals that will allow parents or grandparents to free up funds to divert toward retirement savings, while ensuring that the kids are meeting the savings targets they set in their own plans.