Not everyone learns personal finance skills in school. Without this, Canadians may struggle to cover daily costs and maintain financial wellness. In an RBC Survey, over half (51%) of parents gave financial assistance to their adult child in the past year, averaging $6,151. If you think they’re only helping their younger adult children, think again: 1 in 5 parents of 35- to 40-year-olds still help pay the bills.
More parents provide financial support for everyday expenses and basic needs: 56% help with groceries, 24% with rent, and 21% with utilities. Other expenses include bills, emergencies, and credit card or debt payments. Here, I’ll explain why this trend is happening, share how parents can manage financial expectations, and offer tips on applying for government benefits.
Why parents are financially contributing to their adult children
In recent years, the cost of living has risen. Now, we’re navigating U.S. tariffs and a trade war. It’s harder for young adults to find a job. Some in their 30s and 40s who have lost their jobs have had to move back home. To make matters worse, homeownership remains out of reach for first-time homebuyers.
As parents accumulate wealth, they're likely to take part in the great wealth transfer. One reason is to give their adult children a better life and more opportunities. Some prefer to give money while they’re alive so they can see their adult children enjoy it right away.
How parents can manage financial expectations of their adult children
Start by reviewing your adult child’s monthly budget together. Understand where their money comes in and goes out. Identify areas of overspending and look for ways to cut costs.
For young adult children, you can gradually add on financial responsibilities. Start with small money management tasks, such as paying for some groceries, like their lunch. When they reach that milestone, ask them to cover their cell phone bill. That way, they can become more independent and gain the confidence to handle bigger financial obligations.
With the basics covered, you can then move on to more advanced topics like health insurance coverage. They can get it through their post-secondary school, employer, or through a private plan. It can cover prescription drugs, dental care, specialist visits, and other medical costs that a provincial plan doesn't normally cover.
Plan ahead for educational costs
If you plan to enroll your child in post-secondary school, a Registered Education Savings Plan (RESP) can help cover these costs. If you contribute $2,500 a year, you may be eligible for the Canada Education Savings Grant (CESG), which is free money. The Canada Learning Bond (CLB) also helps low-income families with children.
If your child is already enrolled in post-secondary school, determine the entire year’s educational costs. These may include tuition, textbooks, food, housing, transportation, a laptop, clubs and organizations, and other fees. Decide who handles paying these costs.
Beyond the bank of Mom and Dad, many programs offer students financial help. Your child can apply for student loans, scholarships, bursaries, and grants to help cover these educational expenses.
Understand the purpose of different banking products
Emergencies can happen at any time. Encourage your child to open a savings account to build an emergency fund. This gives them a cash reserve to help pay a medical bill or repair their car.
If your child wants to own property someday, the First Home Savings Account (FHSA) can help them save for a down payment. A line of credit may also help cover everyday costs instead of relying on a credit card, which typically has high interest rates.
Apply for government aid
Learn about the different government programs that offer financial support. If your adult children are experiencing financial hardship, provincial and municipal programs can provide hardship assistance. For example, Ontario Works provides financial help to cover basic needs and help people find employment.
Also, if your adult child becomes unemployed, they may be eligible for Employment Insurance (EI) payments while they look for a new job.
They may also qualify for many federal and provincial/territorial benefits. You can use this Benefits Finder to search for programs that offer financial assistance, healthcare, and other benefits. Some of these benefits may help people from low-income households.
If you have children under 18, the Canada Child Tax Benefit (CCB) is a tax-free monthly payment to help families cover child care costs. Social assistance programs also provide financial support to help individuals and families meet basic needs.
During tax season, community organizations often host free tax clinics in your area. To receive government benefits, you need to file your tax return with the Canada Revenue Agency (CRA) on time every year.
Don’t risk your retirement nest egg
Give your children what you can afford. However, don’t let it negatively impact your retirement. For instance, don’t sacrifice your contributions to your Registered Retirement Savings Plan (RRSP) or your company pension (if you’re lucky enough to have one).
Remember, your adult children still have years (often, decades) to work and earn income. If you’re planning to retire soon, however, make sure you can support yourself financially and meet your own needs. That could mean reviewing your investment portfolio and deciding when to start collecting Canada Pension Plan (CPP) and Old Age Security (OAS) benefits from the Government of Canada, when to start taking your pension, and when to draw down from your RRSP. You may consider talking to a financial adviser or financial planner to help you optimize your retirement income and understand the tax implications.
Give your children opportunities to build financial confidence
It’s a fine balance between giving your children better opportunities and helping them learn to manage their money wisely. As much as we, as parents, want to protect our children, it’s also important to let them make their own mistakes. That's how they learn lessons and build resilience. Sometimes, they just need a parent to guide them through their financial decisions and planning.
If you need financial help managing your debt, our team of credit counsellors is here to help. Contact us today to receive a free consultation.