The Gift,

Met with my friend for coffee again, last Friday of the month as usual, this time at her house. Her hubby was away and kids, mostly adults, were wherever kids go, half living there, half living somewhere else. She talked about how cramped her house used to feel, how there was always a houseful of kids, and that it was never quiet and often felt like they were tripping over each other. It’s a modest home described by her as a BC box of 30-40 years. She tells me she often now sits in the quiet of it and remarks how big it now feels. Funny how this 2,000 (or so) sq. foot home would have been described as “big” back in the day and now, by todays standards might be considered a small home, a starter home. Houses these days seem to have morphed into small castles that include technology and finishes fit for a king & queen. Seriously what happened? When did the average modern house become a McMansion and why do we keep building them? yet complain that the housing market is out of reach and why why why, are we , the consumer , not demanding reasonably sized homes with a reasonable sized yard, even the townhouses are becoming unaffordable for many , are we going to have a generation of children raised in condos without the experiences of backyards ? 

I know this might sound hypocritical of me as I am in the business of selling houses and obviously trying to make a living, but I would much rather see young couples and families easily making there way into  the market based on smaller affordable homes than I would want to see the very few economically blessed keeping those monster houses in demand . Increase the demand for affordability and maybe the supply will follow but I suppose for now this is the reality of today’s market.

Last month we discussed helping your 20 somethings save for a down payment , I hope it was useful but I can hear some voices saying “ yea right “ This month I want to give you another option to think about that we briefly touched on and that is “gifting “ some , part ,or all of the down payment ….crickets…I know , I know, I can hear you loud and clear “how’s that teaching them to save, that’s just giving in to the over entitlement of this generation , how is that teaching them to save, to be independent , to know struggle? But , as I mentioned before, getting into this market is tough , it’s not the same  variables we had back in the day and I’ve crunched numbers and comparisons with you before , so you know what I’m talking about , but maybe if you look at this with some perspective. 

All of us want to give our kids the best start in life , we afford them , hockey , dance lessons, piano and all the minutia of time , energy  equipment that goes into those formative years. As time goes on we afford them tutors , anything that will improve their chances at whatever and improve their quality life , for some , that is even medical intervention etc. They get older and we encourage and assist in post secondary education etc. Heck some throw their children elaborate weddings because it’s tradition or a social norm but when it comes to helping with a house suddenly we want them to make it on their own in the biggest financial decision /purchase they will ever make.

If you are in a financial position to do so, I would assume most of us want to leave a financial legacy for our children after we go, whether it’s our savings , our investments , life insurance or property . In that case, we will never see or celebrate what becomes of that money, what joy it brought them. Would you rather see it while you’re here, just a thought, sort of an advance on what they would be getting, a security for yourself as well , knowing that your money is being well utilized /secured both financially and emotionally

With the new BC Homeowners grant , see link below, in nutshell allows buyers to have their 5% matched by the government with no payback required until the resale of the home , in that case  , the gov’t receives 5% of the total of the sale of the current market , so likely a profit would allow for this, but always a risk no matter what.

So that brings up the other 5 % where does it come from? If you are willing, able and comfortable to even consider “gifting “ them the other ( or part of ) 5% then some things you may want to consider 

  1. The whatever you do for one rule…if you plan on helping one of your precious offspring with financial assistance be prepared to assist the others at some point as well. Those sweeties have a memory of an elephant and I bet you if you asked them they could each recall a time you gave sibling one an extra 5 dollars then you did sibling 2 back when they were 8 and 10, or that you spent more on Johnny’s hockey than you did on Suzie’s dance classes  it’s somehow part of their reptilian  brain, I think that they associate money and love . 

  2. Ask yourself is my kiddo financially responsible? Really have a blinders off look at them, watch how they spend their money. Do they pay their bills on time, do they seem to have money left at the end of the month are they stressed about money, do they come to you for loans, even small ones. Do they have the means to carry a mortgage and the taxes expenses required to maintain a home, will this leave them house poor? Investment and home ownership is great, but, if their quality of life plummets just trying to stay afloat you may be setting them up for failure.

  3. Be prepared that if you are going to give them the 5% as a gift, it must be that, a gift and you will have to prove it with a letter stating so, that it is not a loan.

  4. Don’t feel obligated. This is not a requirement or measurement of a “good parent’ , it is an act of generosity , a privilege and should be received as such , but again , as in most life choices of your young adult you may be able to plant some seeds of advice and  state some conditions but you may not get a say on the exact home or location.

  5. Probably the most important question you have to ask and be totally honest about is “Can I afford this now and down the road, will it effect MY quality of life /retirement? “I strongly urge you to discuss this with your financial advisor, he/she will help you with a reality check and be able to look at this with perspective and not emotion. He/She may be able to give you some good ideas about how you can help without hindering yourself. Maybe you can’t give the 5% but maybe you can match  them with 2.5 % each or maybe if wedding bells are in their near future you offer them a choice of a modest wedding but a financial gift towards a down payment instead of a 3,000 wedding dress ( ugh just another industry that is savaging the good sense of our people today ) 

Whatever you do , whatever you choose  remind them of the house they grew up in , where you began your journey ( even if you have to humble it up a bit ) , that it’s not the size the house or the glamour of the house ,or the finishes accessorizing the house or what the Jones’ ( boy those jones’ sure get a bad wrap ) are buying . It’s about starting out, starting somewhere and putting in the necessary time, patience and sweat equity to make it a home of their own.

More questions than answers? Let’s do coffee

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