Are masses of millennials really draining their parents' retirement fund?
It's not a given that young adults are mooching off their parents more so than previous generations
It's a popular stereotype these days: the masses of young people suffering from "failure to launch syndrome." They can't get it together and land a decent job so they move back home and wind up draining their parents' retirement funds.
The notion has led to a deluge of advice from financial experts on how to cope with financially needy adult children.
The problem, though, is that beyond anecdotal stories and small-scale polls, there doesn't appear to be any concrete evidence that millennials are any more of a mooch than previous generations. This isn't our first recession and, whether right or wrong, parents have always been quietly slipping cash to their grown-up kids.
Yes, Canada's youth unemployment rate is at a disturbingly high 13.1 per cent but, guess what, in 1985 it was higher — 15.4 per cent.
The millennial moocher theory feels a bit like that popular notion that "today's kids" feel entitled and have it easier than previous generations.
- Millennials should move in with parents to prosper, say financial experts
Parents feeling the pinch — really?
Last week, a CIBC survey found that two-thirds of parents supporting adult children — meaning non-students, 18 years and older — are feeling the financial "pinch."
The story made news across the country. "Parents say adult children draining their nest eggs," and "Adult kids draining parents' retirement funds," shouted the headlines, referring to the poll.
But what wasn't emphasized by some news reports was the fact that the survey only polled a specific group of parents: those who are financially supporting adult children.
It's not that shocking that two-thirds of those parents currently supporting an extra person are feeling the "pinch." Wouldn't most people?
What the CIBC survey of 1,054 participants doesn't gauge is how many parents aren't supporting their adult kids.
Nonetheless, there's an ongoing general impression that many millennials — right now, those roughly 20 to 35 years old — are emptying their parents' bank accounts more so than previous generations.
Canadian retirement expert and author Fred Vettese does believe that times are tougher for young adults these days.
"It does seem to be a bit of an epidemic that 25 year olds are not able to find that good first job, and they are underemployed to a great degree," says the chief actuary of Morneau Shepell in Toronto.
Still, Vettese adds, that doesn't prove that twentysomethings are bleeding their parents dry.
He adds that, in his opinion, parents have always aided adult children with big ticket expenses — everything from weddings to mortgages. "The amount that they've helped kind of depends on the financial circumstances of the parents," he says.
Also, not every poll is showing millennials are a poverty-stricken bunch. A recent report by BMO Economics suggests that young Canadians, specifically those between 25 and 34 years old, are on average wealthier than their parents were at that age. But they also carry more debt.
Does living at home = mooch?
The growing number of young adults living under their parents' roofs has often been hauled out as evidence that millennials are big mooches.
It is true that more young people are living at home than in previous decades. Not surprising considering rising post-secondary enrolment, the high cost of tuition and housing, and the fact that young people now often get married later in life.
And Vettese does believe that when young adults live at home, chances are parents are footing some bills. "It is reasonable to assume … the parents are going to incur additional expenses in the form of food and utilities," he says.
The CIBC report stated that "national data suggests that parents are increasingly supporting their adult children." It noted as an example that the most current Statistics Canada census from 2011 found that 42 per cent of people aged 20 to 29 lived with their folks, compared to 32 per cent in 1991 and 27 per cent in 1981.
The CIBC poll also showed that the most common form of financial support that parents who were polled dole out to their adult kids — at 71 per cent — is free room and board.
Paying their own way
But not all non-student, adult children residing with mom and dad are getting a free ride. Some are actually helping with the household bills.
Statistics Canada notes in its census survey on young adults living at home that "exchanges of support could occur in both directions to the extent that adult children contribute to the household in various ways."
I recently wrote a CBC News article about millennials moving in with their parents after finishing post-secondary school. It featured 25-year-old college graduate Katelynn Langer who moved to New Hamburg, Ont., in October to live with her 50-year-old mother, Marjorie.
She felt she had no choice after realizing she was barely making a dent in her approximately $28,000 in student loans even though she was working two waitress jobs.
So she shacked up with mother. While she isn't charged market value, Langer pays her mother $200 a month in rent and helps with household bills.
Marjorie says her daughter is actually a financial help rather than a strain. "Being able to share food expenses and household [costs] is great," she says.
Langer has also made good progress on her student loan, cutting it down by $8,500.
Considering she's getting her finances under control, moving home for the time being may result in her not having to hit up her mother for cash in the future when, for example, Langer buys her first home.
So it's just not a clear-cut case that today's adult children are any more of a financial mooch than yesterday's generation or the generation before. Considering this, maybe we need to give millennials a break — even the ones still living at home.