Hey there, time traveller! This article was published 18/10/2013 (2455 days ago), so information in it may no longer be current.
Like it or not, many baby boomers on the cusp of retirement still have adult children at home. Of course, their big kids likely also have lukewarm feelings about living in their parents' basement.
Regardless, millions of young Canadians are living at home longer.
The latest census data from 2011 indicate about 42.3 per cent of Canadians between ages 20 and 29 are living at home, a slight decrease from the previous census in 2006, when 42.5 per cent lived with their parents.
But the trend over the last three decades indicates more young Canadian adults live at home longer than in the past. In 1991, for example, about 32 per cent of 20-somethings lived with their parents, and in 1981, about 27 per cent lived at home.
This new normal undoubtedly has an impact on the pocketbooks of parents and adult children alike.
Parents may have less cash for retirement, while their children attend college, pay down debt or save for a down payment on a home.
Every situation is different, and this living arrangement can be beneficial for both parties, or not.
The difference usually boils down to planning, says Darren Quering, a certified financial planner with Edward Jones.
"Communication is very important piece of the process," says the Winnipeg adviser. "There should at least be a family meeting and some type of dialogue to develop a plan as to how long this new relationship will last."
In most cases, parents can absorb the added cost of an adult child living at home. They can handle the higher water and grocery bills. Some even appreciate live-in children, who can watch over the home while they spend weeks away at the cottage or down south.
"It's good and bad scenarios," he says, adding the bad might be a grown son living in the basement and playing video games all day, with Mom and Dad picking up after him and paying the bills.
Psychologist Dr. Moira Somers works with many families experiencing the financial and emotional stresses that come with children living longer at home.
She says it's not always a case of an adult child suffering from the Peter Pan effect.
For one thing, leaving the nest is a taller task economically than in decades past.
"There was affordable housing in affordable cities and young people could afford to move out," she says.
University costs were less and a degree increased the prospect of getting a high-paying job.
Today, young adults require more education, often incurring more debt. They also face higher living costs, and if they want to own a home, they must save much more for a down payment than in the past.
"For lots of socio-economic reasons, it's much harder for people to leave home even when they want to," says Somers, a financial therapist at Mind, Money and Meaning in Winnipeg. "Yet there are also a number of different psychological factors at play."
Children's roles have changed. Somers says because families are smaller than in the past, children have a reduced part in helping run the household. Their main job is being a good student.
"There hasn't necessarily been a whole lot of emphasis they should be productive, contributing members of the family," she says. "And that's where it really can turn out to bite some families when the kids become adults, because they carry on with the same actions."
As children enter adulthood, leaving piles of dirty dishes and cars on empty, parents can feel resentful, especially if they're also helping their children out financially.
"That's what I'm facing more in my financial therapy practice right now -- parents that are just going 'Oh my goodness, what have we created here?' " she says.
"They seem to be experiencing adult children who are kind of entitled and lazy, who don't really see what needs to be done."
But it's not simply a case of some parents inadvertently creating the problem. Ironically, an increased societal shift toward individualism is also contributing to a generation that is often more dependent on their parents than in the past, says Dr. Jean Twenge, author of Generation Me: Why Today's Young Americans Are More Confident, Assertive, Entitled -- and More Miserable Than Ever Before.
The psychologist says two U.S. long-term studies of young adults' attitudes toward wealth and work point to an increased emphasis on the individual and materialism.
"There's more emphasis on basically becoming rich," says Twenge, also a professor of psychology at San Diego State University.
One study of university students' attitudes reveals young adults -- more than ever -- consider being financially well-off very important. About 81 per cent of students surveyed across the U.S. reported it was important, as opposed to about 42 per cent in 1966, when the study first began collecting data.
Twenge says over the past several decades, we've been weaned on phrases such as 'believe in yourself' and 'you're special' that are beneficial to self-esteem but can also lead to a shock to the system as we enter adulthood, realizing expectations don't match reality.
"That's probably where some of the anxiety and depression comes in," she says. "There's a big disconnect between expectations and reality."
Striving to match reality with expectations might be why a recent study by the Financial Consumer Agency of Canada found 60 per cent of young Canadians carry debt, with the most common form being consumption-driven, credit card debt.
To boot, a recent TD survey found many young adults are overspending on discretionary purchases, says Crystal Wong, senior regional manager with TD Waterhouse Wealth Financial Planning.
The survey of adults between ages 20 to 29 found 48 per cent overspend on entertainment, 38 per cent on fashion and 29 per cent on technology.
"They're often referred to as the 'always-on generation' and perhaps that's why they're always looking for the next best thing when it comes to gadgets," Wong says.
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Yet the study also found many are saving for the future, too. More than half are saving at least 10 per cent of their income. The problem is nearly two-thirds of those surveyed didn't have a budget.
Again, it's a good and bad picture, and probably one of many reasons why a good number of young adults have difficulty launching their independence.
Still, both parents and children alike can take measures to ensure reality more closely matches their dreams -- at least financially. And it really starts with learning to budget, ensuring more money comes in than goes out, Wong says.
"It's not just the gen Ys that require this education. It's a lot of people regardless of age," Wong says. "But if you start the discipline early, it increases the likelihood for financial success in the future."
And you're less likely to have -- or be, depending on your age -- that adult kid overstaying his or her welcome.
A few financial tips can ensure living together involves fewer domestic battles and more bliss.
For the parents:
Impart the responsibility of chores at home early. Psychologist Moira Somers says if they can put a fork on the table, they can do a chore. "Parents have to lay the foundation down with their kids so they know they have a couple of different jobs in the home besides taking school seriously."
Teach your kids about money sooner than later. Financial planner Crystal Wong says parents can help their kids in the long run by making them save some of their money. This lays down a foundation for budgeting in the future because they get in the habit of not spending everything they earn.
Don't just have a financial plan for retirement. Have a plan to get your children out of the house and financially independent, says financial planner Darren Quering. Parents and adult children need clarity on each others' goals. The family should discuss the potential impact -- good and bad -- an adult child living at home can have on the family finances. Goals need to be set and means to reach those goals must be defined. More than anything, establish boundaries. "I may feed you, but I won't be filling your car or paying the cellphone bill."
Don't be resentful. Many parents who are unhappy with their children living longer at home can feel this way, Somers says. "It can be a signal you're doing too much and you need to make a change," she says. "A lot of parents go along with it because they just want peace in the family -- even though they shouldn't sometimes."
Be gentle but assertive. If something has to change, someone has to initiate it. In most cases, it will be the parent. Somers says getting your child out on his or her own is often a long process requiring determination, patience and understanding this issue of dependence has built up over years. "It's not a matter of changing the locks on the door and saying 'That's it. You're out!' "
For the kids:
Start a budget. If you haven't learned to do so, there's no time like the present. "It's as simple as drawing a line down a piece of paper with money coming in versus outgoing money on the other side," Wong says. "You have your absolute requirements to live like rent or mortgage, food, utilities, transportation, and then you have the discretionary spending." Good budgeting involves closely tracking discretionary spending. "We don't tend to think about the ramifications of that spending unless we look at where every dollar is going."
Master your plastic. Using debit and credit cards can be great ways to keep track of your spending because it's all listed on a statement monthly, but plastic can be disastrous if you're not mindful of how you use it. "When you're using credit, you have to remember that you can't spend what you don't earn," Wong says. It's a simple strategy yet often deceivingly difficult for folks of all ages, she adds.
Pick the right savings vehicles. Saving for retirement and for a home require very different investments. "If you want that first down payment on the house, you wouldn't be putting money in the stock market," says Quering, adding bonds and GICs are a better fit. But if you're saving for retirement or want to build wealth, investing in the stock market may be a better bet in the long term.
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