Getting financial assistance from your parents isn’t ideal, but for more than one-third of Canadians, it’s necessary if they want to cover the cost of rent.
According to a new housing affordability survey commissioned by FP Canada, 35 per cent of Canadian parents with children over 18 have already helped their kids pay for rent. And more than one-in-three (36 per cent) with kids under 18 plan to do the same.
This is a substantial proportion, but considering the high cost of housing, it can’t come as too much of a surprise. A Padmapper report found that “nearly half of the total cities had double digit year over year growth rates for either one or two bedroom rents” in July. Rent for a one bed in Toronto and Vancouver has now climbed to over $2,000!
Unfortunately, these high prices mean affordable housing for minimum-wage workers is pretty much non-existent in Canada. Full-time hourly workers would need to make an average of $20.20 per hour just to afford a one-bedroom, a previous study found.
But rent isn’t the only cost on the rise. Canadian house prices continue to climb drastically, which explains why more people over 18 are financially reliant on their parents to afford a home.
In fact, 24 per cent depend on the Bank of Mom and Dad in order to become a homeowner, the housing affordability survey found. But despite the fact that parents are willing to help, there are consequences to this.
Thirty per cent of parents say they’ll have to dip into their retirement savings to do this, while one in four (26 per cent) say they’ll have to use their home equity.
But that’s not the worst of it. By helping their kids pay for housing, 39 per cent of parents will have to postpone their retirement, and 34 per cent will have to delay paying off debt. These numbers are both up from 27 and 22 per cent, respectively, in 2017.
“With house prices at unprecedented levels in many regions of the country, it’s nearly impossible for many young Canadians to get into the market without assistance from their parents,” Kelley Keehn, personal finance educator and Consumer Advocate for FP Canada, said in a statement.
“Even though it’s natural to want to help your children, it’s essential to carefully consider the impact on your own financial security before helping with such a huge purchase.”