Educating family members with finances

Financing a full nest: Managing your money while supporting loved ones


I recently visited a friend whose 22-year-old son needed a place to stay while looking for a new apartment. “Just a few days” stretched into weeks, then months without an end in sight. My friend’s once-empty nest quickly became the flocking zone for young adults who’d show up at dinnertime and routinely crash overnight for days on end. With the burgeoning brood came bigger food bills, along with climbing costs for utilities and even gas, as the son opted to use the family car instead of re-fuelling his own.

Budgeting is important at the best of times, especially as the “sandwich generation” — adults who are caring both for children still at home and elderly parents needing support — contends both with adult children staying home longer while continuing their education or saving for a home, and with aging parents often sharing the family residence or requiring long-term care support.

But supporting loved ones at a time when the cost of living has increased substantially means it’s ever more critical to effectively manage household finances while planning carefully for the future.

For coupled parents and single parents supporting adults — and those looking ahead to a likely future with adult dependents — here are some strategies and resources that can help you tackle the added expenses and still plan for your own financially secure future.

First, get a solid handle on your finances.

The essential first step in managing your finances is to create a budget that lists out your income (from all sources), expenses (fixed and variable), debts and investments. This allows you to identify areas where you can cut costs and maximize savings, not just for short-term cash crunches but for long-term financial goals too.

Create a budget.

It might sound daunting or even dull to track everyday expenses, along with discretionary costs and emergency savings. But if you follow these six steps to budgeting, it becomes easy and even empowering to build financial management into your day-to-day routine.

Redirect non-essential spending.

Once your budget is in place, stay the course with a handy online cash flow calculator, which does the math for you. Patterns quickly become clear. For instance, you can pinpoint flexible spending (takeout meals or coffees, etc.) and non-essential purchases, and consider reallocating those funds to a savings account for your kids’ education or paying down debt including mortgage payments or credit card balances with higher interest rates.

One of the best ways to get your adult kids primed for a life of independence (even if they’re still rooting around in your fridge for snacks), is to teach them financial literacy.

Get support to reach your long-term goals.

Pay yourself first. It gets said a lot in financial circles, but parents must also focus on their future goals, even if the present is filled with supporting others. It can be particularly challenging for single parents, who often shoulder responsibilities solo, to keep their goals on track. Taking that trip to Mexico or retiring before 65 can seem elusive (or even self-indulgent), but having a line of credit can make for smarter spending, allowing you to take advantage of travel deals that pop up instead of saving up the cash and potentially paying more.

Sure, you might feel like your expenses have you stretched to the max, but every bit adds up. Use tactics like dollar-cost averaging: contributing $50 a week rather than $200 in a monthly lump sum lets you take advantage of snowballing savings, especially if you opt for a high-interest account.

Providing financial assistance to adult dependents.

There’s a fine balance between providing financial support to family members and maintaining financial stability. First of all, you’ll need to determine if you can afford it. It’s one thing to grill up extra steaks when hosting your adult kid’s friends from time to time, but if they plan to live at home, that could make a serious dent in your finances.

It doesn’t matter what end of the spectrum they’re on; it is the discussion that’s important in getting adult children to think about their goals and how to attain them.”

-Guy Wildeman, Wealth Advisor

Plan for educational costs.

If you’re planning to fund their education, it’s a good idea to start early with a realistic picture of the costs by undertaking education planning. Start saving as early as possible, and find out how you can take advantage of tax incentives such as RESPs and government training grants, which can help pay for tuition fees, school supplies, and even room and board if your children move away from home to study.

And eligible families may qualify for up to $2,000 in federal funds through the SmartSAVER program, designed to help boost participation in the Canada Learning Bond (CLB) to help kids pursue post-secondary education.

educating family members with finances

Plan for housing costs.

But what happens when your kids are ready to fly the coop for real? With real estate prices reaching record highs in BC, it’s tempting to contribute to a down payment for their first-time mortgage; however, it’s crucial to consider the short- and long-term impact on your finances, too. Will it mean giving up a second car, forgoing a family vacation or delaying your retirement by a few years?

Consider alternative ways to support your kid’s home ownership journey, such as helping to pay for closing costs, renovations or the first few months of mortgage payments. Explore government programs such as the Home Buyers’ Plan, First Time Home Buyer Incentive and BC’s first time home buyer’s program. Or seek professional advice from your wealth manager so they can help assess your situation and provide guidance to ensure you  protect your financial well being while helping your kids in a way that feels comfortable to you.

Plan for elder care costs.

If you’re also taking care of aging parents, be sure to factor in the costs of caregiving expenses — whether they’re living with you or in a senior’s residence. You may wish to seek out government assistance for seniors, along with other community resources and support networks to help ease this transition.

a couple talking about elder care cost

Consult tax and financial professionals.

Carefully consider the best ways to go about sharing your wealth. Gifting — cash, assets or property — can be a tax-efficient way to provide financial support. Although Canada doesn’t have a gift tax, be sure to consult a tax pro to walk you through the implications and incentives.

You might also wish to consult a wealth specialist to assist with estate planning, and discuss how to distribute your assets to loved ones later (which might include the family home) while also saving on taxes.

Involving adult children in family finances.

Even if they’re in school, your adult kids may be able to help lighten the load by contributing to the family finances, whether with their own income or in other ways. “Set boundaries,” says Guy Wildeman, wealth advisor with Vancity. “This can range from adult kids doing their own laundry, cooking and cleaning to paying rent.” It might not always be possible, he adds, “but saving a portion or all of the ‘rent’ for a future down payment [on a property] or help with other financial needs,” can be beneficial in the long run.

Discuss their financial needs with them

Having open conversations about finances and your children’s future is also key, says Wildeman. “This can be very open-ended, with questions that include: ‘What do you see yourself doing in 10 years?’ Or very specific: ‘Do you know the cost of running a vehicle?’ It doesn’t matter what end of the spectrum they’re on; it is the discussion that’s important in getting adult children to think about their goals and how to attain them.”

Walking your kids through the banking basics, even if their only income is an allowance, helps them start building an understanding of financial management. – Guy Wildeman, Wealth Advisor

Encourage them to save for their future.

The budget for a young adult can vary wildly, depending on whether they have expensive studies, pastimes or require a car to commute to work or school. (A Planet-Wise Transportation loan can make this more affordable and environmentally friendly.)

But the biggest barrier to independence comes with the cost of housing (and the time-honoured question of whether it makes more financial sense to rent or buy — incentives such as the new first home savings account can help with the latter). Along with factoring in day-to-day living expenses, young adults should be encouraged to save for a rainy day and consider the long-term horizon of building their own nest egg for the future.

Focus on financial literacy.

One of the best ways to get your adult kids primed for a life of independence (even if they’re still rooting around in your fridge for snacks), is to teach them financial literacy. And if you’ve got younger kids, it’s a good time to start! When kids are old enough to learn numbers (as young as age 3), they can tackle the basics, like practicing counting coins and bills and finding the joy in putting their coins in a piggy bank (or the free Chequing Plus account for youth under 25).

acquiring financial literacy through self-education

Teach kids to save for a goal.

As children get older, tying chores to an allowance is an incentive to save for a goal, says Wildeman. Parents can work with them to achieve it, creating sound financial habits while reinforcing the value of spending money on ‘needs’ versus ‘wants.’ Walking your kids through the banking basics, even if their only income is an allowance, helps them start building an understanding of financial management.

Set them up with automated savings.

When they get their first job or enter adulthood, help them to strengthen their financial skills with sound practices like setting up direct deposit from payroll (and an automatic savings program) and choosing low- or no-fee accounts such as E-Package Chequing.

A Vancity enviro™ Visa* card also enables them to tap into the convenience of having a no-annual-fee credit card without having to qualify. More than just a credit card, Vancity’s enviro Visa funnels 5% to environmental initiatives, creating a positive impact on the planet for future generations. Of course, before encouraging a credit card, be sure to discuss how their credit score works, and the importance of paying off their balance in full. This will help them develop responsible credit habits and avoid paying interest, if possible.

Although life in BC can be expensive, supporting adult dependents can be a rewarding experience; one that can strengthen your bonds as a family and create a brighter financial future for all.

Need advice? You can book a one-to-one planning appointment with one of our wealth management professionals at Vancity, to talk about options relating to your family’s financial situation.

* Trademark of Visa Int., used under license.

This blog post provides general information only, and does not constitute financial, accounting, tax, legal or other professional advice. We encourage you to obtain personalized advice from qualified professionals regarding your particular circumstances. Please see our Terms of Use.

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