Author Topic: Bank of Mom & Dad  (Read 5416 times)


  • 5 O'Clock Shadow
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Bank of Mom & Dad
« on: December 02, 2014, 12:56:33 PM »
Tragically, another piece of awful from where I live, and maybe a bit of an explanation for why real estate prices continue to become awful for those of us trying to save to buy on our own merits. Toronto Life did some profiling of adults, many in their 30s and even early 40s relying on wealthy boomer parents to help them cover expenses because they can't live within their means on their own:

It's absolutely ridiculous. I can't imagine getting a 200K gift from my Dad, even if he did have 200K to spare.


  • Pencil Stache
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Re: Bank of Mom & Dad
« Reply #1 on: December 02, 2014, 01:28:23 PM »
We talked about this before.  I should ask my dad for another 100,000 or so to pay off my mortgage, but he's still got a few years on his.  Conversely I want to move back in but my wife and mom will have none of that.  We could combine our income to buy a big house instead of a medium house and a small house.  For five people something like
small income (y)=4
large income (x)=1
House Size = (500+1000x+500y)square feet
add in no income variables for children (z) and we might be on to something.

This is going to be the next trend when the Bank of Mom and Dad can't finance multiple properties.


  • Stubble
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Re: Bank of Mom & Dad
« Reply #2 on: December 02, 2014, 03:20:28 PM »
IMHO this is awesome if your parents are extremely wealthy, like could go out and buy a vacation home in the south of France without taking out a mortgage wealthy.  Otherwise, it's a mean expectation.  What about your parents' retirement and old age? Even with the Canadian healthcare system, the cost of elder care can be quite high.


  • Stubble
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Re: Bank of Mom & Dad
« Reply #3 on: December 02, 2014, 03:38:45 PM »
I have luckily the reverse of this. Without asking my parents have done well for themselves and realize that they don't need all of it. They have gifted my money to do with as I please. It has been a great experience to see how I can maximize these gifts to achieve more FI.


  • Stubble
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Re: Bank of Mom & Dad
« Reply #4 on: December 04, 2014, 02:59:47 PM »
This is American consumerism at its worst, and parents from previous generations should know better.  Buying more house than what's needed for your child, even if paying it off, sets your child up for a lifetime of "mommy and daddy" expectations without a shred of financial expertise.

I don't want my tax dollars going to fund these people once they get older, continue their lavish lifestyle, and expect someone else to pick up the check. 


  • Bristles
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Re: Bank of Mom & Dad
« Reply #5 on: December 08, 2014, 09:26:49 PM »
I think Jackie Chan said it best when it came to giving/leaving his kids money...

"If they're not capable, they'll waste all my money. If they are capable, they'll earn their own."


  • Pencil Stache
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Re: Bank of Mom & Dad
« Reply #6 on: December 09, 2014, 10:27:18 AM »
My parents loaned us money for our down payment on our first house, it was about $5000 and we paid them back a few years later. They also helped my sister. (Unfortunately, she has never been able to pay them back. She makes very little money and has had more than her share of bad luck.)

My parents were helped with the down payment for their first house by my paternal grandmother who also helped her other sons. I think each was given a choice of help with a down payment for a house or help with a business loan to start a business. Similarly my uncles all helped their children with either a down payment or a business loan. (Lots of entrepreneurs and engineers on my father's side of the family.) I'm pretty sure that everyone paid back the loans because if people didn't it would have become family scandal as it has for my poor sister.

My paternal grandmother was helped with a loan to get to the United States to start a business by her family who also helped her with connections to the community of people from the old country living in the US.

I don't see this as promoting dependency. This to me seems to be what every generation does for the next. (Isn't this sort of a modern dowry?) I suspect that we will be helping my sister's children since she does not have money and we do not have children.

On my father's side, the older generation has not been dependent on their children for money as they aged because in addition to saving for down payments or business loans, they've also put money away for retirement or have been able to sell their businesses for enough to live on.


  • Magnum Stache
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Re: Bank of Mom & Dad
« Reply #7 on: December 09, 2014, 10:41:40 AM »
I took a loan from my mother, because she had a large EF and I had mentioned needing to keep my 5.75% loan because we could afford to pay it off or buy a second car, not both when my husband graduated from grad school.  I am paying her back with a variable rate based on what she could earn in a high yield savings (I offered 3%, she asked for nothing, we compromised).  It makes sense to help the next generation, if you can, if you want them to succeed.


  • Magnum Stache
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Re: Bank of Mom & Dad
« Reply #8 on: December 09, 2014, 11:56:03 AM »
I didn't read the other article, but I concur, that depending on the demographic it is pretty common for parents to help out with house or other starting up costs (obviously not to degree in article!). My greek grandmother painstakingly saved 40k from sweatshop work, and gave it my Dad and uncle to start their first business. They inherited additional property when she passed. My mother, while not helped by her parents, was helped by her grandmother (college) and grandfather (inheritance). My husband's parents, and the parents before them, were helped by their parents (first house, also inheritances). There was a bit of a to-do, because MIL told her kids she would split her inheritance with the kids. Then when time came, changed her mind (bought a new car instead). I know a number of friends who have been helped in some way to either afford their first house or to extensively remodel their house, some small, some quite extensive amounts.

For whatever reason, me and my sibs, as well as husband first generation in a number of generations in our families not assisted in this way, and told NOT to expect an inheritance. totally not a surprise from my side, but a little from husband's side, who are well off. They also did not help with costs or give money for only daughter's wedding, which I thought was strange.   



Señora Savings

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Re: Bank of Mom & Dad
« Reply #9 on: December 09, 2014, 02:08:30 PM »
I think that the problem with this article is that the author is trying to create a general narrative without using any facts.  It's a story about 20 or so families taking loans from their parents; she claims that it represents an entire generation.

For example:

And these are people who are well into their prime earning years—people who, in any other decade, would be paying off their mortgages and building their RRSPs.

What decades is she talking about?  Is she under the impression that this is the first generation to not be saving adequately for retirement?  If that's true, then I'd like to see some evidence of it.


  • Bristles
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Re: Bank of Mom & Dad
« Reply #10 on: December 15, 2014, 11:23:27 PM »
Piketty talks a bit how, with the longer lifespans people have today, much of the intergenerational transfer of wealth has moved forward from inheritance to funding education and real estate for young families, as those are far more important touchstones of social class, compared to a substantial sum at age 40 or later from inheritance after 20 years of struggle.