Parents give adult children $24k average to move out
August 10, 2017
It is important to understand that there are no taxes on financial gifts to adult children in Canada, no matter the amount given.
The poll showed 76 per cent of parents would be happy to give money if it would help their child move out, get married, or live with their significant other.
Almost two out of three parents would rather give their adult child money than have the child remain living at home.
The average gift of $24,000 is based on parents having varying income amounts.
Parents earning more than $100,000 annually are prepared to gift $40,000 – $50,000.
One of the most significant shifts in the way Canadians live is the new reality that children are twice as likely to live at home while they are in their 20s as was the case in the 1980s. Statistics Canada reported that 42 per cent of people in their 20s still live at home.
Acting as the ‘Bank of Mum and Dad’ to financially launch the children isn’t a new concept, but it could be risky.
The trend towards supporting adult children should be viewed in the context of how it impacts the parents’ long-term financial plan.
The largest financial risk the parents face is the possibility of outliving their financial assets. Especially taking into consideration that there are fewer people with significant pension income, and that Canadians are experiencing an ever-increasing life expectancy.
The family gift expenditure should be viewed in the same light as any other expenses. Can the parents afford it?
For some families, a significant financial gift to children could result in the parents becoming less financially stable during their later years.
They might be forced to move in with the children as a result of failing finances.
There is also a risk to the children.
Children who receive money from their parents might not use the money wisely. They may be encouraged to live beyond their means.
For example, assume a child used the money to purchase a more expensive house than they could otherwise afford.
A more expensive house is usually more expensive to operate year in and year out. Could living in an expensive neighbourhood, with more affluent neighbours, lead to peer pressure to live a lifestyle beyond their means?
We can learn from the CIBC survey, Statistics Canada information, and financial planning common sense.
More adult children are living at home. More parents are providing financial gifts to their adult children. Both parents and their adult children have financial risks.
I recommend using this information to determine what is in the best interest of your family, both parents and adult children.