You had your best-laid plans and then COVID-19 came along and hammered the entire economy. But you’ve got this – if you have the right information. Join Rob Carrick and Roma Luciw on Stress Test, a podcast guiding you through one of the biggest challenges your finances will ever face.
ROMA: Are you helping your parents with their finances? Paying for groceries, monthly bills or even funding their retirement?
ROB: You’re not alone. We’re used to hearing the opposite – parents helping their adult kids. But today, we’re talking about Gen Z and millennial Canadians who are flipping the script and helping their family with money.
[THEME MUSIC UP & FADE IN]
ROMA: Welcome to Stress Test, a podcast about personal finance for Gen Z and millennials. I’m Roma Luciw, personal finance editor at The Globe.
ROB: And I’m Rob Carrick, personal finance columnist at The Globe and Mail.
ROMA: So Rob, we’ve all heard about the “bank of mom and dad.” That’s where parents are supporting their adult kids well beyond their traditional school years and into their 20s and 30s. Something we don’t hear about as often is the reverse. Where young adult kids are chipping in to help their parents pay for things. There’s not a lot of data on this and it’s not an overwhelming phenomenon. But for the young adults who are doing it, it’s one other financial obligation among many. Rob, where do you think this is happening?
ROB: Well, I got some insight into this in two different anecdotes. I’ll relate. One is that I’m on a bus coming home from work, and this millennial Globe and Mail reader who recognise my face came up to me and we started talking and he started telling me the story about how he and his wife are going to have to be looking after the retirement of his wife’s mother and father. And that’s just how things were working. And he was a bit…I think he had just recently had this dropped in his lap and he was coming to grips with it and he was looking for a little support. And it sort of made me think, Wow, this is this is an interesting situation. And then about a year later, I get an email from another reader who says I’m worried about my parents’ retirement. I don’t know if they have enough money, and I’m starting to be concerned that I might have to chip in. You know, how do you suggest I proceed? And it got me thinking that this is a quiet but significant issue in personal finance. Younger adults who are going to be called upon to help out their parents. Could be with covering basic expenses. It could be topping up their retirement income. It could be strategic help here and there, but this is sort of a quiet, undiscovered territory of personal finance.
ROMA: One of the things that I’ve heard of from some of our readers and over my years covering personal finance is that elements like a late divorce, an unexpected illness, a job loss…any of these things can contribute to financial problems and will place the parent in a financially difficult situation. And then the child steps in. That’s not always the case. We also know that with some immigrant families in certain cultures, this kind of support is expected.
ROB: I have to think the pandemic is going to accelerate this idea of families encountering surprise events that require, like younger members of the family to step up and contribute. Could be illness or could be forced early retirements. A lot of chaos in the economy caused by the pandemic. And as we’re speaking, the Omicron variant is roaring through the country and we’re sort of getting a new batch of businesses closing down or shutting down or going on hiatus. And I think that’s just going to provide more sort of economic upheaval. And I think plans that were in place for a comfortable retirement may be disrupted. And I think there may be kids who are going to have to chip in somehow to support their parents.
ROMA: That’s right. And I mean, it all depends on the financial situation of the adult kids, right? If they’re high earners, if they’re comfortable in their career, if they’re well-established, there’s less of a strain in that case. But if they’re struggling financially, if they’ve had a job loss, you know, if they’ve been disrupted, if they are in the position that very many young Canadians are in, which is they’re trying to get a foothold in their career, trying to pay off student debt, trying to save for a down payment, then that is another financial obligation for them to deal with and that will certainly impact their finances.
ROB: In today’s episode, we’re speaking with a Millennial who has been helping her family with bills since university. That’s up next.
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ROB: When it came to supporting her parents financially by paying for family expenses, our guest didn’t hesitate.
BANIN: Hi my name is Banin. I am 27 years old and I’m from Stoney Creek, Ontario.
ROB: Banin and her family immigrated to Canada from India in 2001. Before that, the family claimed refugee status in India, after leaving Afghanistan in 1993. In Afghanistan, her dad worked for the Ministry of Finance and her mum was a teacher.
After settling in Stoney Creek, a community near Hamilton, Ontario, Banin’s parents worked hard to give their kids a financially secure life. Her dad became a butcher and mum worked at Dollarama.
BANIN: The one thing with my parents, they never made us feel like we couldn’t financially afford anything. My dad worked two jobs when we came to Canada. He was working 16 hour days, like going from one job to another just basically to support our family. Initially, my mom wasn’t working. I think it was like after five or six years, my mom actually started to work as well. And that was basically because my parents are like, “You guys don’t need to work. Don’t ever worry about money. If you guys need anything, tell us.” Their whole goal was to make sure that, like, we all finished school. Like we got an education. For that reason, we didn’t really understand. And like, we didn’t know our financial situation because that was very hidden from us.
ROB: Banin has three older siblings - 2 brothers and a sister. All of them worked part-time in high school for their own spending money. After university, the siblings all started contributing financially to their parents’ and shared household expenses while also paying off student loans.
BANIN: Once my sister also graduated, she started pitching in as well. And when my sister graduated, I was working at a co-op and my co-op actually like I was getting paid fairly well. So at that point, I decided to also pitch in with my co-op money. And at that time, I went back into school and I was still like, “OK, I’m not going to pull back and say, like, oh I’m not going to support you guys anymore.” So even through school, even though I wasn’t making much money because I still kept the co-op position for part time, I was still pitching in until I actually graduated.
ROB: In 2012, Banin’s family bought a house. But that same year, Banin’s dad had to stop working because of health issues.
BANIN: By the time we decided to get a house and stuff, my dad actually fell sick, mostly because he was working 16 hour days, seven days a week. He went way too hard on his body and his heart problems got worse, his kidney problems got worse and all these other health issues. So my dad was not able to work anymore.
ROB: With her dad unable to work, the financial responsibility of mortgage payments fell onto Banin and her siblings. Stepping up was never something she questioned doing.
BANIN: Our parents covered any expenses we ever needed. I had braces. My sister had braces. My brother had braces. My dad paid for all of these expenses. So for us to step in and actually help pay for the house, it didn’t feel like, Oh, why? It was like, we got to relax. We got to like, get our comfortable jobs. And now it’s time to actually like, build our family up.
ROB: Some of Banin’s friends are in the same situation as her––also helping their families out with bills and expenses.
BANIN: I do have a friend that, like basically his dad got sick and he kind of ended up paying for his whole family like every expense because his dad was the sole provider. And he took over that responsibility, and it still is that case for him.
ROB: When Banin was working her co-op term in university, 25 per cent of her monthly pay went to helping her parents. Her income is higher now and she still contributes the same percentage of her pay cheque.
BANIN: My older brother is married so he doesn’t live with us anymore, but he still pays a small amount for the mortgage. My sister and I, and my other brother who still live at home, we cover almost the mortgage as well as my mom. And then my brother covers all the utility costs. So anything like that. And my sister and I cover our phone bills as well as internet bills.
ROB: Banin graduated university with $50,000 of student debt that she’s still paying it off. Right now, she can put away some savings, but not at the pace she’d like.
BANIN: I do feel like I don’t have the same advantages for being able to save as much as I’ve seen my peers being able to save. I had friends who actually are immigrants, but like their parents like, you know, cover the cost of their weddings and paid off their tuition the day they graduated. You know, like wrote a cheque and like here you go, like great your school’s paid for and, you know, like all these things that you see and it’s like all like they’re already like 10 steps ahead of me. So I have had those like resentments internally, like seeing that like, oh, like, I never got these opportunities of being able to like right away have your income actually to yourself. And even now, like my income is like still helping support my parents because I do live at home and I don’t feel like I’m just supporting my parents. I am also still living in this house, so I think I treat it like I’m paying for myself living here.
ROB: In comparison, Banin’s partner who makes roughly the same income as her, was able to buy a house with a downpayment he saved.
BANIN: Like he was able to do that because his parents kind of didn’t really ask for him to cover a lot of the costs of the house. For him helping his parents, it was like an extra bonus for them. It wasn’t really like, “Hey, we need your income.” Where I know that’s not my situation, even right now. Like, I’m planning on getting married. And like oh, if I move out like I already know, like I’m probably still going to be having to pay for my parent’s house because I know my income is actually…affects like them living here.
ROB: So what does Banin’s partner think of her financially supporting her parents?
BANIN: When it came to expenses like I made it very clear like this is an expense that we have that’s not going away. And he’s very understanding. And he said the same thing. Like if my parents ever needed something financially like, I would expect you to be also understanding of meaning for them. But I’m like, that’s I think that’s it’s just having immigrant parents who know and at that time, when we decide to get married or even my four or five years down the line, both of our parents are at retirement age and no one will be working, so us having that understanding of knowing that our parents will not have any financial freedom for themselves like we…it is our responsibility to help them. Yeah, it’s good that we were on the same page when discussing this.
ROB: And how does Banin feel about needing to help her parents out with money?
BANIN: I would say at this point in my life, it is something I kind of am proud of. Like the fact that I am able to help my parents. Like, I’m lucky enough to be fortunate enough to make a fairly good income. So being able to help them is like, OK, like, you know, like these guys struggle like they left their good jobs, like their good incomes, like, you know, had like a comfortable jobs back home to come to Canada and work minimum wage jobs. You know, like they came here and like, were working actual labour jobs to support us going to school to be able to get these jobs. If they didn’t push us to get a good education, like, I don’t think I would be in a position of having the salary or the position I have. So no, like me paying for them kind of doesn’t really feel like, it’s not stressful. Maybe at a time it was. When I first graduated because I was seeing all these debts I had and all that and I’m like, OK, like, I’m still at zero, like at the end of the month, like there would be zero savings. So that was hard to see. But now I’m like, OK, you know, I am still able to do that as well as, like, live a comfortable life. If I didn’t have to pay those things, I think I’d be in a different position and I probably would be able to live on my own by now, you know?
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ROMA: After the break, we’ll speak with a financial planner about what she’s seeing when it comes to adult kids helping their parents with money.
ROMA: Many things can disrupt a person’s finances - an illness, a job interruption, a divorce, or another emergency. In some families, the GenZ and Millennial children need to step in and contribute financially to keep their parents afloat.
I spoke with Natasha Knox of Alaphia Financial Wellness about when and where she sees children helping their parents with money - and how that impacts the planning for her young adult clients. Here’s part of our conversation.
ROMA: So in season two, you and I spoke about how parents are increasingly supporting kids, adult kids well into adulthood throughout their 20s and even into their 30s. And not just with housing down payments, which is huge in the Vancouver area where you are and also in Toronto, where I live. But with things like daily bills, cell phones, groceries, things like that. So today we’re going to flip the tables and talk about the reverse. What we’re seeing and hearing when it comes to children supporting their parents financially. There’s not a lot of official data on this topic, but we know, at least anecdotally, that it’s happening on some level. Where have you seen this with your clients?
NATASHA: Oh, I’ve seen it quite a lot with my clients and it looks different in every household. So there is like the straightforward version of sort of ad hoc assistance, you know, like if the parents have like a big annual bill or something that they need help with, something unexpected, you know, maybe the children help chip in for that. Sometimes it takes the form of monthly assistance, so there will be some monthly amount that goes toward their parents. Sometimes siblings come to an agreement around everyone, helping to the greatest degree they can. Sometimes they don’t. Sometimes they get involved with the parents real estate in some way, like they may buy the family home or some way of unlocking the equity that their parents have to give their parents enough to live on. So those are a few of the ways that I’ve seen help take place.
ROMA: OK, well, what are the ages of the young adults you see providing support? The ages of the parents and then the economic financial circumstances of each?
NATASHA: There’s a range there as well. I’ve seen clients as young as their early thirties helping their parents all the way into, you know, people that are approaching their fifties and looking at their own retirements. And the parents are quite, quite elderly versus when people are in their 30s, the parents might be slightly younger and the economic circumstances. It’s not just clients that are super high income earners that are helping their parents. Like they could be modest themselves. They might have other demands on their money, but it’s an important value of theirs to ensure that their parents are OK and not struggling. So they make that work all the way up to people who can very, very easily afford it because they have done very well. And that’s just something that they’re in a position to do and are happy to do.
ROMA: I know that we run some stories on things like grey divorce, which is basically a situation where people get divorced late in life and that can often really disrupt people’s finances because they don’t have the years to make up in terms of earnings. And that was money and income that they had been depending on to live out the retirement. I guess also illness. I was just wondering if you’ve seen any of these things, as you know, potentially contributing to reasons why parents might be in need of that kind of aid or whether it comes down to just circumstance.
NATASHA: So I mean, there are some children whose parents are struggling and there is like, I get a sense that there is maybe some decision making that had a role to play. And I see that less often with financial support. I do see widowhood as being a factor, so a lot of times it’s one parent that’s being supported as opposed to both parents. Not always. Sometimes there was like some sort of cataclysmic event. So like a business that failed or an investment that went horribly wrong or, you know, the loss of income or health or mental health. So some of those factors could be at play as well, but result in the situation.
ROMA: What is the feeling? Is there...how do they feel about having to provide this help or wanting to provide this help for their parents?
NATASHA: I think in most cases it is something that they are happy to do and that they’re wanting to do. And so, you know, the way we sort of tackle it is we look at it as a responsibility like any other commitments that they make. I sort of try to find out a little bit more context, like how dependent…like how reliant are their parents on this income? Because then, you know, we have to have a conversation around, OK, if your parent is reliant on this income, really, there’s a dependency there and you have to ensure that if something happens to you. Your parents can continue to be cared for in the manner that they’ve come to depend on. Part of my job involves ensuring that they’re not doing so at their own expense. But usually, if it comes to trade-offs, like if I have to show my clients like, OK, well, this is what you have to do in order to make things flow for yourself in the future. I have yet to see the support toward their parents ever be on the chopping block. Like that is just not something that people are looking to decrease or looking to consider as you know optional spending that they’re going to eliminate. Like it’s very much like once they start doing it, they’re in it.
ROMA: From what you’ve seen, do you often see sort of an agreed upon previous expectation that the parents and the kids had spoken over the years and the kids knew that at some point the parents might have to lean on them for some help? Or do you see this sort of arising unexpectedly?
NATASHA: It more arises unexpectedly. And also the other thing that I see sometimes is people wanting to talk to me about the possibility of this needing to be the case because they’re not really sure there hasn’t been that kind of open conversation or disclosure. So the children are making guesses about the parents financial situation, but they just sort of want to make sure that if this becomes necessary, that they have the wiggle room to be able to do that.
ROMA: OK, in some immigrant cultures, kids are expected to provide for their parents as soon as they start working, and the parents’ retirement plan largely relies on their kids. I mean, not all immigrant cultures are like this, but some are. Have you come across that in your practice?
NATASHA: I have. People who immigrate here in adulthood, sometimes leave behind, you know, assets or leave behind the earning potential that they had or the status they had within their profession. And it can be rather challenging. So they don’t have that same sort of ramp up time and access to OAS and CPP, like that might be the GIS, but that’s a whole other thing. So in some cases, it is very, very helpful for their children to band together and support their parents. And when the children are still very much a part of that culture and are still very much in line with those sort of cultural norms, then it’s a very comfortable situation for everyone.
ROMA: OK, let’s say that you have a young adult millennial come to you and say, I’m going to start providing financial assistance to my parents. What kind of tips or sort of tactical advice do you have for them in terms of how to structure their finances in the best way to do that?
NATASHA: OK, so let’s start with. Understand your own finances first, make sure that you have everything in place as far as understanding your cash flow, understanding the adequacy of your contingency fund, like making sure your own risk management is up to snuff. Like all of those basics really need to be in place. And I would say the next thing to understand is like what the nature of that support is and what’s the degree to which your parents are relying on it. So is this like a baseline support that they really need in order to get by? Or is this a life enhancement kind of a support? And then have a conversation with your parents about, what you can do for them.
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ROB: Hearing the comments from Natasha and Banin, it really reminds us that young adults in all types of families are chipping in. Many different circumstances. Some are more affluent families where this can be planned and some are families where they just do this on an ad hoc basis. The parents have need and the kids have cash and they come to an accommodation. All this brings me to the takeaway for this episode, which is that I really think families need to talk this through. Young adults, pay some attention to your parents finances and see how well set they are. Do they need help in the here and now? Are they well set for retirement? And parents, if you think you need help from your kids, it’s something you want to raise with them and help them find an accommodation that lets them cover their costs and help you at the same time.
ROMA: Thanks for listening to Stress Test. This show was produced by Amy Chyan and Zahra Khozema. Audio engineering and editing by Kyle Fulton. Our executive producer is Kiran Rana.
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Thanks for listening! And see you next week.