There’s a practical reason to find out about the financial health of young adults by consulting their parents.
Though it’s not well documented in standard economic statistics, parental financial support for adult kids is common. Even with that help, a lot of parents are worried about what the financial future looks like for these young people.
An informal survey of parents of millennial and Gen Z kids was recently conducted through the Carrick on Money newsletter. Of the 573 parents who responded, just 13.7 per cent agreed that their adult kids would have a better life financially and close to 18.7 per cent said their kids would have a comparable life.
About four in 10 parents said their kids would not have a better life financially, but they’ll be okay. This leaves us with a 27-per-cent block of parents who think their kids will be worse off and worry about it.
A tough job market is a contributor to this pessimism. Almost one-quarter of parents who participated in the survey had an adult child in their family who was seeking a full-time job, but had only found part-time or gig work. Just over 18 per cent said they had an adult child who was unemployed and looking for work.
The overall unemployment rate has steadily climbed over the past year. Claire Fan, a senior economist at Royal Bank of Canada, said young people looking for first jobs have contributed the most of any group to this increase.
“Students are entering the job market and looking for that first job,” she said. “But the hiring demand is just not there.”
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Two-thirds of parents who believe their kids will not have a better life blame high living costs, including housing. Challenges in the job market were cited by 12.5 per cent, and the lack of a vibrant economy by almost 6 per cent. Among the other reasons cited were health issues.
On housing, 60 per cent of parents said there is an adult child in the family that has a job and wants to buy a home, but can’t afford to. This group can more or less be broken evenly into three subcategories – those who think their child will eventually be able to buy a home, those who doubt it will ever happen and those who say parental help is the only way their kid will get into the housing market.
Close to half of parents with kids who can’t afford a home said their kids are sad about it, but resigned. About 35 per cent said their kids were angry or depressed and about 18 per cent said their child is planning to move to a cheaper Canadian city or leave the country altogether.
In some other respects, parents see their Gen Z and millennial children doing reasonably well. Almost one-third said their kids are ahead of where they were at the same age for saving and investing, and close to 20 per cent said their kids were more or less on the same timeline.
Another apparent positive is that almost half of survey participants said the non-mortgage debt level of their adult kids was comparable to them at the same age, and 22 per cent said their kids owe less.
But these debt findings mask a trend identified by RBC’s Ms. Fan as a sign of financial stress for young adults today. In recent years, people under the age of 35 are the only cohort to have seen a decline in mortgage debt.
“This is not because they have a bunch of money and they’re all of a sudden being super responsible and paying down their mortgage,” she said. “Those that entered the market in 2020 and 2021 are now running into a bit of a trouble with interest rates. They’re the only group I’ve seen that has been persistently deleveraging.” Deleverage means reducing debt, sometimes by selling assets like a home in this case.
High housing costs help explain why 34 per cent of parents in the survey said they had adult kids living at home with them. Within this group, a little less than half said their kids could afford to live on their own, but are living with parents to save money.
A little over four in 10 parents said their kids are financially independent, and one-quarter said their kids would have to make sacrifices without parental help. The rest, almost 31 per cent, said they financially backstop at least one of their adult kids.
“That is substantial,” Ms. Fan said. “Essentially, they’re relying on their parents for their day-to-day funding.”
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