The Bank of Mom and Dad, now BOMAD, is a term I recall first hearing after the 2008-09 recession, when the storyline of parents financially supporting young adults took off. It’s almost laughable now to think of the kind of help being offered then – payment of cellphone bills, car insurance and sundry other expenses.
Today, BOMAD’s biggest line of business is real estate. With housing prices soaring in recent years, parents have become instrumental in helping young adults build the down payment they need to buy a house.
A recent study from CIBC Economics found that parents had provided more than $10-billion in down payment money in the past year, and that close to three in 10 young buyers received this help. The average amount given by parents was $82,000, which is roughly a century’s worth of cellphone bills.
In an upcoming episode of our Stress Test personal finance podcast for Gen Z and millennials, we want to give parents a chance to talk about this trend. We’re looking for stories from parents about why they chose – or didn’t – to help their kids with a home down payment, and what the effect on their own finances has been. Did their kids expect the help, or ask for it? Are parents feeling peer pressure to help their kids buy a house?
It’s past time for the parents to have a voice about what’s happening in housing right now. If you’re willing to talk, send an e-mail to my Stress Test co-host, Globe personal finance editor Roma Luciw, at rluciw@globeandmail.com.
Subscribe to Carrick on Money
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.
Rob’s personal finance reading list
The 67.5 per cent rent increase
Home buyers are flowing into New Brunswick to capitalize on affordable housing. What’s the impact on the local real estate market? Check out this story about a couple of seniors who fear they will have to move out of their rental because the rent is going up $675 per month. Now for a story from Bancroft, Ont., a small town about 250 km northeast of Toronto, where prices have surged almost 50 per cent on a year-over-year basis. Here’s a new idea for cooling the housing market: an annual surtax on houses valued at more than $1-million.
The credit card they call ‘the destroyer’
RewardsCanada posts its top credit card picks for travel rewards and cashback. The winner in both is American Express Cobalt, which they call “the destroyer” because it’s so competitive. TD Aeroplan Visa Infinite also scores well on travel rewards, while CIBC Dividend Visa Infinite is strong on cashback. Amex Cobalt also takes top spot in a card ranking by CreditCardGenius.
Inflation and the 60/40 portfolio
Investment industry people on the changes they’re making to the traditional 60/40 mix of stocks and bonds as a result of rising inflation. Basically, this means adding money to stocks at the expense of bonds. Now for some tips on managing your finances as inflation moves higher.
Four ways to increase your savings for 2022
A reminder that as your income increases through the years, the amount you save should rise as well. Helpful suggestions here on how to find the money for a savings hike.
Tell Rob
I liked this comment from a reader in Ontario about buying versus renting: “I think, as I am going into retirement, that renting is a good option for us. I have owned a home for the last 40 years. But with our next move, I am going the rent route because I think it is foolish to own another house in older age. What good is it if you can say your house is worth $1-million if all you have to live off is CPP and OAS? We are doing fine, but I think it is a waste to have this capital locked up in bricks and mortar. It may look good on paper but you may as well enjoy it while you can.”
Do you have a question – or comment – for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
The Top 10 most popular stocks and exchange-traded funds listed on the TSX in 2021.
The Money-Free Zone
Pandemic melancholy, captured perfectly in a tweet.
What I’ve been writing about
- A finance professor’s advice on investing in bitcoin: Just say no
- Demand for tutoring soars as parents spend thousands to help kids amid disrupted online learning
- A legal change on Jan. 1 will affect couples who marry and their wills
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.
