Canada

How to get your boomerang kid to leave the nest—for good

In some Canadian cities, the housing market is forcing kids to move back home with their parents. A financial literacy expert talks tactics on handling the situation.

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young man lifting boxes from the back of a vanAs per the last General Social Survey on Family in 2011, of those aged 20-24 and living with their parents, 31 per cent had moved back home after spending some period of time away (Shutterstock/Monkey Business Images)

Looking forward to an empty nest? Not so fast. 

Young adults in Canada are much more likely to live at home with their parents than in previous decades, according to Statistics Canada. While some simply move out later, others—the Boomerang Generation—return home after first trying to venture out on their own. 

More than one in three (34.7 per cent) young adults aged 20 to 34 were living with at least one parent in 2016, says Statistics Canada. Of those just in their 20s, the numbers have continued to increase through the years; from 42.5 per cent in 2006, 32.1 per cent in 1991 and just 26.9 per cent in 1981.

While the census doesn’t identify the reasons young adults are living with their parents, the cost of housing is surely contributing, says Brigitte Lazarko, CPA, senior director of finance for Great West Life Realty Advisors Inc. in Winnipeg. Lazarko, who is also a financial literacy volunteer for CPA Canada, thinks the boomerang effect is becoming more common in expensive housing markets. [See Millennials: Here’s where they stand in the Canadian housing marketplace]

“Everybody has that dream of owning a home, and they’re seeing [that] it’s going to take quite a bit more to get there than perhaps the previous generation,” she says.

This is among the reasons why the federal government is taking steps to address Canada’s housing affordability. In its 2019 pre-election budget announced earlier this year, the government introduced a first-time homebuyer incentive and increased the RRSP withdrawal limit in the Home Buyers’ Plan.

“Housing has become a flashpoint issue for young Canadians,” says Francis Fong, chief economist with CPA Canada. “The supply-demand imbalance in many of our biggest cities has resulted in prices that are far beyond what most are able to afford, but it isn’t even just about home ownership. The rental market faces the same supply issues and has resulted in, at least anecdotally, in intense competition for whatever units are available.”

While it’s tough out there for millennials, Lazarko offers a few tips for how families can handle the boomerang effect: 

WHEN THE KIDS FIRST MOVE OUT

At this stage, the most important thing you can do with your kids is sit down and teach them how to prepare a budget, Lazarko says. 

“Not just to budget, but to keep track of that budget and to watch where they’re going offside and maybe some ways that they can shift their spending,” she advises. “For a lot of young adults, using a credit card or using debt makes it so the money is a lot less visible.”

It’s also important young adults know the real costs of owning a home, Lazarko says. “Because it’s not just paying the mortgage, it’s all the repairs and all the other things that come along with owning a home.”

The goal should be that young people today have better financial literacy skills than their parents had, she says, because the price of housing has skyrocketed relative to the cost of living.

“I think it’s more important than ever that young people understand what they’re facing and be really cognizant of the implications of their lifestyle,” adds Lazarko.

IF THEY RETURN TO THE NEST

As per the last General Social Survey on Family in 2011, of those aged 20-24 and living with their parents, 31 per cent had moved back home after spending some period of time away.

For some families, allowing adult children to live at home longer could be a proactive strategy to help them save money. But if your child has boomeranged back to the nest, you might consider having them contribute to the household expenses, Lazarko says. 

“[This] teaches kids that by being [back at home], they are affecting their parents financially,” she says. “But it also means it’s less of a reality check for them when they move out.” 

She adds: “They’re absorbing those costs into their regular routine, so when they’re ready to go out on their own, it’s not a shock.”

Lazarko also suggests that for parents who don’t really need that money for household expenses—but still want to instill the value in their child—they take the money and set it aside.

“Then when [your adult children] buy a house, you can tell them you’ve saved that money and give it back to them,” Lazarko says. “So there are ways to have the tough love but do them a favour at the same time.”

START THEIR EDUCATION EARLY

If your children are not yet of moving-out age, there are still some things you can do to help them prepare for the future, says Lazarko. Financial literacy starts at home and if children see their parents constantly buying things and struggling to say no, they never get into the habit of making choices. [See CPA Canada’s A Parent’s Guide to Raising Money-Smart Kids]

“When parents are more transparent or when they don’t spend past their means, children learn they can’t always get everything they want and that there has to be those sacrifices made,” she says.

Teaching kids from a young age about saving and budgeting with an allowance helps them learn that sometimes it takes time to get something. Learning those skills early in life will help them make better financial choices as a young adult.

FAMILY FINANCE TIPS

Get a head start on teaching financial literacy at home by learning how to talk to your kids about money or showing them how to handle their allowance like a pro.