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August 12, 2015 | Kidults

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Joe failed. Twice, actually, he says.

“I moved back in with my parents in my twenties after a business failure (he’s a decade older now) and it was possibly the worst move I have ever made.”

Wait. How can this be? Being a Boomerang kid or a ‘failed-to-launch’ member of ‘Generation Screwed’ is big these days. A recent bank survey found a whopping 43% of Canadian parents with adult children not in school have allowed their spawn to stay at home rent-free. A third have helped the kids make a major purchase, like a car, while a quarter pay down their credit cards. Even four years ago more than 25% of all adults between the agents of 25 and thirty were living in their folks’ basements, according to Stats Can. And there’s reason to believe things are worse lately. So, obviously, this is a social phenom.

But back to Joe.

“In hindsight I should have sucked it up and eaten kraft dinner for two years and stayed independent. The saved rent/mortgage payments didn’t even come close to compensating for the psychic damage inherent in harming my excellent relationship with my parents, my reduced sense of self-worth, and diminished social life,” he confesses.

Advice, Joe?

“Any millennial considering a move back home should first cut their cable, internet, car loan, shopping at Whole Foods, buying import beer, skinny jeans, etc. If their best alternative option is then still living in a van down by the river, then move back in with mom and dad (maybe). Otherwise, don’t do it.

“You often make the points on the blog that good financial decisions mean freedom, and that time is the most precious commodity of all, and I agree on both points. If young people are counseled to sacrifice freedom and time for money, I would argue the advice is completely opposite to what they should be told. You chase the almighty dollar to gain time and freedom later, not the other way around. Sacrificing comfort or material things in the short term is smart and disciplined. Trading precious time and freedom for money misses the point entirely.”

It’s hard to argue with this. Delaying adulthood so Mom can wash your skivvies, feed you and spare you rent while you pay off student debt and retreat to the womb is an utterly bad decision. It may be less stressful to pretend you’re twelve again, but it does nothing for your credit rating, financial experiences, sense of self-worth or to build survival skills. Almost as bad is the Bank of Mom & Dad, shoveling free money into the downpayment on a piece of real estate you would not otherwise be able to afford.

Why? Because that’s not how the rest of life works. It saddles you with unrepayable debt. It robs you of the freedom and flexibility youth should enjoy. And it screws up the housing market for everybody else. After all, without that parental subsidy real estate prices might have plateaued years ago for want of first-time buyers, instead of continuing to wildly bloat. (More on today’s news, below.)

But there’s a darker side to this FTL thing: the impact on the wrinklies.

Face it, your folks aren’t as rich as you think. And they won’t talk about it. The inability of parents to be honest with their kids about finances is legendary. Between 60 and 70% of them have no defined corporate pensions to rely on and, if lucky, will end up with some employer-matched RRSP fund full of dead-end mutuals. Half of all families are living paycheque-to-paycheque, and over 90% of TFSAs aren’t maxed. RRSP contributions have been dropping off a cliff, and household debt’s rising at three times the inflation rate. More and more, wealth is being concentrated in a single, over-inflated asset, leaving so many Boomers dangerously undiversified and with oodles of market risk.

And now they have to feed and finance a 28-year-old? Or two?

Twenty years ago I wrote a book called “2015, After the Boom” which forecast the mother of all retirement crises, starting about now as the hippie love children began turning 65 in droves. Too much wealth would be concentrated in houses, I surmised, with way too little in financial assets to support lives which would grow ridiculously, tediously long. And here we are. Right on schedule.

But what was unknown then was that half an entire generation would end up in the basement – siphoning off cash flow, preventing downsizing, chewing through retirement savings and expecting free loans. One generation being financially crippled so the next can be coddled, then prematurely indebted.

Here’s something else unknowable at the time: we’d get a government that pimps houses.

Just days after proposing a permanent reno tax credit so this great nation can get more desperately-needed hot tubs and Wolf stoves, the Harper Conservatives have announced a massive 40% increase in the RRSP Home Buyer’s Plan. By allowing a couple to now siphon $70,000 from their retirement savings instead of just $50,000, the Tories are blowing heaps more air into our bulging gasbag of a housing market, ensuring prices will continue to rise (and affordability fall), plus reinforcing the message that saving is silly and debt’s good.

And just to cap it off, a commitment to witch-hunt foreign buyers of Canadian houses – conveniently ignoring the real reason properties are stupid expensive. Like CMHC. Like the Bank of Canada. Like unregulated realtors. Like the home renovation credit and the Home Buyer’s Plan.

The next generation can’t mature fast enough. This one’s a disgrace.

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August 12th, 2015

Posted In: The Greater Fool

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