Seventy-six per cent of parents with adult children say they would give their children money to help them move out, get married, or move in with a partner, and nearly half of them said they would give them a sum of about $24,000, according to a new CIBC poll.
In addition, when given the option, the survey found that nearly two-thirds of parents would give their adult child money to move out rather than have them and their partner or spouse move in with them.
Financial implications of gifting
However, 68 per cent of Canadians misunderstand or say they do not know of the tax and financial implications of gifting.
"The poll findings show that while many parents are thinking about giving their kids a financial boost to leave the nest, there are a lot of misconceptions about gifting," says Jamie Golombek, managing director, Tax and Estate Planning, CIBC Wealth Strategies Group, in a new report entitled Give a Little Bit… "Unlike in the U.S., we don't have any kind of gift tax, which means if you have what's called 'never money' – money you'll never spend in your lifetime – it's worth considering making a financial gift while you're alive to help your kids get started in life."
Don't put your own finances at risk
The poll found that 55 per cent of parents are concerned about gifting to their children, with two-in-five of them admitting they may need the money later. Meanwhile, 29 per cent worry that their child won't use the money 'wisely'.
While more than a third of all parents say they're comfortable taking on debt to give their kids a good start, few parents will actually “tap into their credit lines or borrow from family and friends and 80 per cent of those giving money will draw from cash and savings to fund their gifts,” says the report.
"The caveat to making any financial gift is that you generally don't want to put your own finances at risk," says Golombek. "You need to map out the lifestyle you want in retirement and the money you'll need before making a financial gift."
A potential for family conflict
Golombek warns that such financial gifts can create family conflict “if not handled with sensitivity and forethought.” He suggests parents should consider sitting down with a financial adviser before handing over money. The advisor can help them sidestep familial issues while crafting “a well-thought-out, tax-efficient plan for gifting money or assets."