Every decade seems to add to the cost for parents of having children.
The 2000s was the electronics era, when cellphones and then smartphones took off and it got harder for families to get by with just one computer for the household. The 2010s was a decade of young adults moving back home after graduation because of difficulties finding permanent work.
The 2020s have brought us the growing trend of parents making large gifts of money for home down payments. Parents have long helped their kids buy houses, but a report by CIBC Economics last fall said the amount of money being given averaged $82,000.
The Back to Basics series in the Carrick on Money newsletter has so far looked at ways to spend less and save more. Now, for some thoughts on spending more. If you’re a parent, be prepared for the never-ending cost of kids.
The daycare years are the most expensive, although the federal government’s goal of providing $10-a-day child care should help some families save money. After daycare come the years of activities, sports and, particularly in the pandemic, tutoring. A recent Globe story said the cost of tutoring can run from $120 to as much as $700 per month.
Decades ago, it was common for young adults to become more or less financially self-sufficient after graduating from high school or university and starting to work. Today, it’s pretty normal for parents to continue paying cellphone and car insurance bills for their young adult kids. Helping with rent isn’t unusual.
The most alarming development in parental finance is the mega-size house down payment gift. For well off families, these gifts may simply be a matter of reallocating savings or bringing forward money that would otherwise be left as an inheritance. But there are going to be parents who feel strongly about helping their kids buy a house and will have to sacrifice to do so. (Here’s a recent Stress Test episode on that topic.)
Never-ending costs for parents require never-ending saving and planning. Figure out what your priorities are as parents and prepare as required. One thought is to set up a household “kids’ budget,” where you map out how much of your household income will be used for daycare, and then activities, tutoring, electronics and so on.
You’ll also want to consider your big priorities as parents. If it’s important to you to help your children get through college or university with little or no student debt, a registered education savings plan is a must. If helping your kids buy a house is important, think about putting some money away for that over the years. And remember: if the past few decades are any guide, new parental financial obligations toward their kids will emerge.
Back to Basics
Part One: Now’s the time to revisit the most basic rule of personal finance
Part Two: Would a 20 per cent interest rate get your attention?
Part Three: A month-by-month guide to excuses for not saving money
Part Four: How to ace your mortgage decisions
Part Five: A low-effort, low-risk way to profit from rising rates
Subscribe to Carrick on Money
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Rob’s personal finance reading list
How Canada’s housing market compares
How real estate price increases in this country compare to other members of the G7 group of industrialized countries. It’s frankly alarming how much farther ahead we are.
The problem with online shopping
How to avoid disappointment – and scams – when buying things online. “Whenever you shop on most major online retailers, there’s always the risk that you’re not buying what you think you are.”
A ‘what-if’ guide to not paying your credit card bill
A credit counselling agency explains what happens if you don’t pay your credit bill for a month, for several months and so on.
The cost of driving: Gas vs. electric
Soaring gasoline prices are the news hook for this comparison of the cost of driving an EV and a conventional vehicle
Q&A
Q: Please settle a dispute between me and someone else. We both agree that between spouses, Canada Deposit Insurance Corp. will insure three accounts up to $100,000 each at a particular banking institution:
1) Spouse A’s account
2) Spouse B’s account
3) A joint account with Spouse A and B
Where the dispute lies is in whether a fourth option for CDIC coverage exists if one joint account has Spouse A as the primary account holder and another has Spouse B as primary account holder.
A: A reply straight from CDIC: “Each eligible joint deposit is protected for up to $100,000 per set of joint owners. In the scenario described above, only one joint account between spouses is insured regardless of who is listed as the primary holder of the account. For more information on joint accounts/deposits held in more than one name, please refer to the CDIC website here and for further assistance in understanding CDIC coverage please feel free to use the Deposit Insurance Calculator.”
Today’s financial tool
Looking for a new credit card? Here’s a list of the best welcome offers for February.
The Money-Free Zone
A deep cut of 1970s soul: the song Doing Time in Poverty, from the band Segments of Time’s eponymously titled album. The whole album is worth a listen.
What I’ve been writing about
- The 2022 Globe and Mail digital broker ranking: Does the zero-commission revolution flip the script on who’s best?
- Canadian renters sound off on renovictions, how much they pay and feeling judged by loved ones
- Five stress-saving, money-making moves to make while you wait for a March interest rate hike
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
