What a surprise? Nearly half of all young adult Canadians still living with parents!!!

What a surprise? Nearly half of all young adult Canadians still living with parents!!!!

Boomerang kids (kids of baby boomers), KIPPERS (acronym for Kids In Parents Pockets Eroding Retirement Savings), or “Failure to Launch” kids (the movie about a grown up man still staying at home with parents). Call them what you will, Statistics Canada data gathered during the 2006 census shows that 44 per cent of young adult Canadians age 20 to 29 were living in their parental home. That’s up from 41 per cent in2001 and 32 per cent in 1986.

Having adult children still living at home creates financial challenges but also offer opportunities for their parents. Canadians are delaying marriage, becoming parents at an older age, leaving their childhood homes later and staying in school longer. It’s important that boomer parents acknowledge how this trend can impact their personal lives as well as their financial nest egg, their over all financial plans.

The growing trend of delayed adulthood could increase the cost of living, create a drag on parent’s savings, and even cause a loss of freedom. Here are some practical ideas for parents on how to reduce stress, hard feelings and avoid potential financial disaster:

• Pay to stay: While it may be hard to let go of the parenting role, it is best to treat
your child as an adult and try to replicate conditions in the “real world” as much as
possible. That includes contributing to household expenses, chores and perhaps even
paying rent. If they haven’t found a job already, adult-age children should be actively
looking for work.

• Encourage Future Financial Independence: As an alternative to paying rent, a
child’s accommodation could be conditional upon the child having an investment
plan to help pay for a future down payment on their own home.

• Tax matters: Although having your adult kids at home may put a pinch on your
finances, you may be able to save a little, too. For example, if your children are
students and have no tax to pay, they can transfer up to $750 in unused Federal tuition
and education tax credits (combined) to a parent (plus, provincial tax credits may also be
available).

• Is their “rent” your income: Is your child really paying you fair market value rent?
If they are simply paying an amount to cover their share of home upkeep and the cost
of their groceries, the Canada Revenue Agency (“CRA”) indicates that the income
need not be reported and expenses should not be deducted. When parents attempt to
claim rental “expenses” in excess of the rent they charge their children, they can
expect that the CRA will put them to the test of proving that the rental rate is fair
market value.

The Final Word

Talking openly with your children about money and responsibility is always a good idea. It’s also a good idea to make an appointment with your financial advisor to discuss your situation make sure your plan stays on track.

This article is presented for general information only, consult your financial advisor for advice regarding your specific financial situation.