A discussion of some of these trends and why they are important is provided below by Jonathan Townsend, the National Wealth Advisory Services leader for BDO Canada LLP.
By Jonathan Townsend
Canadians Feel Financial Strain From Different Directions
Recently, the trend of Canadians providing multi-generational financial support has come up as an emerging issue. At a time when many of us should be preparing to retire peacefully, numerous people have signed up for additional financial obligations such as housing, education, and health care—not for themselves—but for their children or parents. This added burden, along with longer life expectancies is putting considerable stress on many Canadians.
In a recent Globe and Mail article, 44% of millennials expect to receive financial assistance from their parents to purchase their first home. Many of them consider home ownership a priority; however due to increased housing prices many cannot fund the purchase independently. Instead, millennials are relying on their parents to make home ownership a reality.
Conversely, the parents of baby boomers are living much longer. Many of them may have not saved enough or are facing unexpected medical conditions which require special care or assistance. Again, many Canadians, especially baby boomers are stepping up to the plate. They are taking care of housing and health care costs for their parents, which have considerable costs. In a recent study by CIBC, it is estimated that these costs average $3,300 per year for a caregiver, and amounts to an estimated cost of over $6 billion to the Canadian economy.
The added financial commitments may not have been part of many Canadians financial planning. The time, energy and money being used to support parents and children is putting a huge strain on funding many of our own retirements. Significant numbers of Canadians are nowhere close to hitting their targeted retirement nest egg because their investment returns have not been what was expected in large part because of the cost of financially caring for their children and/or parents. While research shows it is physically and mentally beneficial to work longer, many people need to work longer, out of financial necessity, to support the family and fund lifestyles and retirement.
For those lucky enough to have cashed in on sky-high real estate prices in some Canadian cities or for those who have received an inheritance, they have decisions to make regarding the net proceeds of downsizing or their inheritance and how much goes to their children or parents.
It’s admirable that many Canadians are taking care of their families’ financial needs but it may come at a cost. BDO Canada is exploring these changes and added expectations that we are facing to see how it is impacting our retirement and financial planning. We invite you to participate in this national survey, which will form a report outlining the key insights we uncover. Respondents will be entered into a draw to win one of five, Let’s Get Blunt about Your Financial Affairs books, written by Mark Goodfield.
Complete the survey now by clicking this link. Please note the book giveaway link is at the end of the survey and takes you to a different location so that your survey comments remain confidential.
Jonathan Townsend is the National Wealth Advisory Leader at BDO Canada LLP. If you have any questions, please contact him at 519-432-5534 or firstname.lastname@example.org.
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