Article by Renée Sylvestre-Williams, featuring LT Wealth’s Terry Wright, for Toronto Star: To read the original article, click here.
With more grown children living at home due to high costs, parents wonder if they should be asking for financial contributions to the home
When RosaLee Farquharson finished college and started working, she started pitching in on rent for the apartment she shared with her mother and her partner.
“I was renting from them and they were renting, so I’d say I was paying about $600,” she says.
She says being taught basic finances in high school gave her an appreciation for how challenging it can be to make ends meet.
“(It was) basic investing, family finance and management. So when those topics came up, that’s when I started to really understand money in terms of what the bills look like exactly,” she says.
Farquharson, 30, who now lives in Burlington, says she brought up the rent conversation with her mother when she was 18 and working part time. Her mother told her to finish college above all else, so when she did then got a job in her field, that’s when she started contributing toward the rent.
With the average rent for a onebedroom condo sitting at $2,355 a month, according to the latest numbers from the Toronto Regional Real Estate Board, moving back in with parents or staying in the family home is becoming more common. According to Statistics Canada’s most recent census, 35.1 per cent of young adults between 20 and 34 re
ported living with at least one parent or grandparent. That’s an increase of about five percentage points since 2001.
The shift has led to a larger generational conversation: Should parents ask their working adult children to contribute financially if they’re still living in the family home? How should you broach that conversation and what do you do with the money if there is an agreement that they will contribute to the household finances?
Terry Wright, an adviser with LT Wealth Management Partners at Raymond James in Vancouver, B.C., says that when parents bring up contributing to the household, it’s often as a way to instil financial responsibility in their adult children.
“It’s not only recouping the costs involved, but also to help bring some realworld experience to their lives,” he says. “When a parent starts charging their 18 or 25yearold child, that’s one of the first lessons I see that kids have when it comes to coming into the real world. They need to have this obligation waiting for them and therefore, there are responsibilities.”
Farquharson says she and her mom had this realworld conversation when she was in college. “She said, `You can stay with me pretty much (until) you get married or (turn) 30. In my head, I was like, `Hey, good. I have 10 years to figure out my career, my finances. So I knew in my head by 30, I had to be out of here and figure my life out.”
If you’re lucky, the conversation is easy. “In families, there’s always that (person) who’s the financially minded one that usually addresses the topic,” say Lianne Hannaway, a chartered professional accountant and wealth coach in Etobicoke.
But if it’s not that easy, Hannaway says to approach the conversation from a place of love and concern. She suggests setting a date to sit down and have an honest conversation about financial expectations.
“Say something like, `I’ve been really thinking about some of the bills, and now that you’re working, we’d like to sit down and talk.’ I’d also preface it with, `I want to come to some decisions in this conversation. So be prepared that we were going to come to some decisions.’ ”
Hannaway says that if your adult children are living in your home, they are going to be adding to expenses like hydro and food. “So things like insurance, condo fees, food, utilities, have a proportion of that paid for.” She emphasizes that the conversation needs to be adult to adult, not parent to child. This minimizes resentment on both sides.
Wright says explaining how much maintaining a home costs can help young adults understand where the money goes. “This means breaking it down further into the details that come at a cost,” he says, adding parents should approach the conversation with empathy, since money discussions within families are rarely easy.
“Speaking honestly, explaining their reasoning clearly, and acknowledging the sensitivity of the topic can help the discussion feel fair and respectful,” he says. “Setting expectations early is also important. Being transparent about household costs and responsibilities helps adult children understand the purpose behind the request and prevents them from feeling caught off guard.”
If contributing to rent is out of reach for them, Wright suggests having them take on groceries, utilities or other household costs. These smaller obligations still build responsibility.
Then there’s the big question:
What to do with the money? In some cases, the money will be needed to pay bills, but in others, it can be used to help the children with the next life stage via enforced savings.
Davindra Ramnarine has two children in their mid20s living at home with him and his wife, Cindy. His son, 24, is working part time and his daughter, 27, did pay toward the household but recently left her job to go back to school.
Ramnarine, who works as a tech lead for a financial institution and lives in the Greater Toronto Area, says that when his daughter started working part time while going to school, they agreed that she would pay some money.
“We used to say, `We’re taking some of your paycheque,’ ” he said. “So we took some, and when she graduated, my wife said, `Here’s your money,’ and gave her $9,000.”
But with “things getting harder,” Ramnarine says, he now encourages them to start saving and investing instead of asking them to contribute to rent.
“Their friends are getting older. They’re getting married, so they’re seeing people that they grew up with moving on. So they know the challenges out there.”
Since Farquharson was helping toward rent, she, her mother and stepfather were able to save money for a down payment on a house they bought last year. The future goal is to leverage this house to buy another house for Farquharson.
“If you’re not responsible with your finances, especially as a child, then naturally your parents are not going to trust you and the things that you’re advising,” Farquharson says.
“And if you feel like you’re in a position where your parents are not hearing you, I think it’s important to get a professional involved and have a roundtable talk.”
When a parent starts charging their 18 or 25 year old child, that’s one of the first lessons I see that kids have when it comes to coming into the real world.
TERRY WRIGHT ADVISER WITH LT WEALTH MANAGEMENT PARTNERS AT RAYMOND JAMES
Article Name:Is it time for THE TALK?
Publication:Toronto Star
Section:BUSINESS
Author:RENEE SYLVESTRE WILLIAMS SPECIAL TO THE STAR
Start Page:B1
