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Millennial Debt: How to Help Your Kids Leave Home

As parents, seeing your kids achieve milestones and reach their personal goals is remarkable. But when it comes to buying their own home, that can be tough for debt-strapped millennials.

Millennial debt from student loans, credit cards, and the high cost of housing is resulting in young people living longer with their parents. Fortunately, there are ways to help them strike out on their own, so you can all celebrate that next milestone.

If your millennial is saving to buy a condo or house

Home ownership was a given for many in previous generations. But things have changed. Home prices have gone up by hundreds of thousands of dollars in some cities, while annual earnings have declined since the 1970s.

In recent years, those millennials who have purchased a home have increasingly struggled with being house poor. Many of them are spending more than the recommended 35 per cent of income on housing, straining their finances and increasing their emotional and financial stress.

Talk to your adult child about the pros and cons of buying versus renting.

Buying a home isn’t always the best option for young people. Owning is more expensive than renting and will take up more money each month, meaning less disposable income for saving, spending and paying down debt.

Renting is also better if they don’t yet know where they want to live. As your son or daughter is getting settled in their career, a job change or two may be in the near future. They may want the freedom to be able to move closer to a new workplace or another city. It could be costly if they have to sell their house, and they might actually lose money, increasing their debt load.

Use a buy-vs-rent calculator to determine whether it’s really better to buy than rent. Remember that Canadians cannot deduct mortgage interest or property taxes, so those numbers should be set to zero if using this calculator.

For another perspective on the rent vs own debate, join the Happy Hour Ladies as they discuss the pros and cons of home ownership.

If your child cannot afford to move out

Millennials tend to struggle with affordability issues, including difficulty securing well-paying, steady employment and high student loans. Learning new or different money management strategies can help them make the most of the money they have.

Budgeting is key — so is understanding the difference between wants and needs. You can discuss debt reduction strategies and review the pros and cons of personal finance apps they can use to track their spending.

If you want, you can share your own money management tools and tips. Explain how you make budgeting, spending and saving decisions to stay in control of your finances. And if your own financial situation isn’t great, take up the challenge and learn new skills together.

The Financial Consumer Agency of Canada offers a wealth of information to help your millennial prepare for moving into her or his own rented place. 

Many parents help their kids out financially. If you can afford to do so without impacting your retirement plans, consider whether or not you’ll actually be helping them. While it’s one thing to help your son or daughter get settled in their own rental, providing a down payment on a house they may not be able to afford in the future isn’t ideal.

Millennial debt is real, and it’s impacting the ability of some young people to get into their first home. Buying isn’t always the best option anymore. Help your adult child explore the benefits of renting and sound money management, and  cheer them on as they achieve their housing independence in their own, generationally unique way.

Is millennial debt keeping your adult child at home? How are you helping them get into a first home? Tell us your story on Twitter. #LeaveDebtBehind #Housing #Parents

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