Close the family bank
The “family bank” is a term many people use to describe the monetary support that parents provide to their adult children. It's similar to the term “helicopter parents” that describes parents hovering over their children's lives, wanting to swoop in and rescue them from life's hardships.
Many Canadian parents are struggling to save and stay on track to becoming financially comfortable, but then get sidetracked worrying about their children. Most believe their adult children aren't going to attain the same level of comfort on their own and will need continuous assistance.
Obviously, the family bank is funded by the parents and the demands now are dramatically different from what they were in the 1960s and '70s. Our parents would never have dreamed of doing what today's parents do for their children. Now many parents are willing to sacrifice all to financially support their adult children in an economic environment where young adults face higher unemployment rates, high housing costs and large student debt.
Millennials are the smartest and most technically advanced generation of all time, yet feel they have more uncertainty, more stress and more anxiety and depression than their parents ever did. This may indeed be true and could account for some of the reasons so many parents are putting their retirement plans on hold.
While helping our kids is something we expect to do as parents, at least until they're financially independent, it's important to realize the longterm cost this can have on our own future. Many parents still have an open-door policy to the family bank, their adult children still living at home with no costs, no rent and a full fridge. Be careful, parents!
At some point, the family bank must switch to become the “parents' bank” only — and this shouldn't be when the day-to-day finances becomes unsustainable. Adult children must realize they can no longer rely on the financial support of their parents due to the inevitable limited resources and amount of time left for parents in their working years.
Sometimes, whether it's forced, planned or necessary, young adults need to experience things that allow them to handle challenges. This will help them build life skills and become more resilient in ways that financial support alone can't provide.
Why not create a long-term strategy, or at least have a frank discussion about financial circumstances on both sides? Your children may believe the family bank should remain open forever and that you as their parents are well set for the future. Remind them of your goals, and also get them to create some of their own goals. Create realistic timelines and budgets, and let your children know you want them to get a good foothold on life — but that doesn't mean subsidizing their current adult lifestyle.
As parents, to be independent and retire with dignity, we need money. Don't give what you can't afford to be without later, when you retire. Remember, love is not something you buy.