Lend a helping hand or not?

 CIBC’s Deputy Chief Economist Benjamin Tal raised eyebrows this week when he said that one in five first-time homebuyers is getting help from their parents with a gift, on average, of $150,000. Not only are more first-time buyers getting financial aid from the bank of mom and dad (up from 15.5% in 2015) but the dollar amount has more than doubled (up from $71,000 in 2015).

This is one of the reasons that older Canadians are working much longer than most experts had predicted. Due to a combination of factors, including the growing number of women in the workforce and a decline in the percentage of dependent children, even by 2030 when boomers are all over 65, the ratio of people being supported by the working population will be similar to that in the 1950s and 1960s. Not only that but in the years since COVID our labour force is being transformed and we are not yet sure of what it will look like in the future.

Twenty years ago, or so, many of the experts were talking about the transfer of wealth from the silent generation to the Boomers, that really did not happen as expected, Now according to a J.D. Power study, as much as $700-billion in financial assets is set to be transferred to the next generation in Canada by 2026.

Like it or not, many retirees have more than enough assets to live their desired lifestyle and leave a significant estate to their beneficiaries. The problem is many of my generation believe that it is not a good idea to save money for the younger generation, but it is a better idea to spend it now or save it for when you need it.

Assume you live a long and healthy life. That’s not as far-fetched as it sounds. FP Canada’s assumption guidelines suggest a 65-year-old male today has a 50% chance of living to age 89 and a 25% chance of living to age 94. A 65-year-old female has a 50% chance of living to 94 and a 25% chance of living to 96.

Many of my friends and my family are not willing to leave a large inheritance and neither am I. I would rather give them smaller and potentially more meaningful amounts at key milestones such as buying a first home, or filling up the grandkids’ RESPs?

My parents believed that if you worked to earn something it was valued more. They say the financial struggle is a rite of passage, and a way to build strong character.

The world is different today, a living wage in my area is about $25 an hour. Home prices are off the scale and prices just keep going up. The different world is where affordable housing and education, defined benefit pensions, and company benefits have all but disappeared. We’re living in a gig economy with temporary contracts, no benefits, and housing and other costs that are spiralling out of control.

If you want to help your children and grandchildren, make sure that your own retirement needs are met before making financial commitments to your kids to protect yourself.