I’m Julian Singh, and I’ve noticed a growing anxiety among Canadian parents: how to help adult children navigate an increasingly unaffordable housing market without derailing their own retirement plans. The dilemma creates dinner table conversations filled with equal parts love, concern, and financial spreadsheets.
When Mark and Linda (not their real names) reached out to me last week, their situation echoed what I’ve heard from dozens of parents across the Greater Toronto Area and Vancouver. Both in their early 60s with stable government pensions and a paid-off home, they’re wrestling with whether to gift substantial down payments to their two children, aged 29 and 32.
“We’ve worked hard to secure our retirement,” Mark told me during our video call, his expression a mixture of pride and worry. “But watching our kids struggle to save while paying Toronto rents feels like watching them swim against a rip current.”
The numbers tell a sobering story. According to the Canadian Real Estate Association, the national average home price hit $705,000 in February 2023. In Toronto and Vancouver, that figure easily exceeds $1 million for even modest homes. Meanwhile, Statistics Canada reports that inflation has outpaced wage growth for much of the past two years, further complicating saving efforts for first-time buyers.
Financial planner Shannon Lee Simmons sees this scenario regularly in her practice. “The wealth gap between generations has never been wider,” she explains. “Many Boomers and older Gen X parents built wealth through real estate appreciation that their children simply cannot replicate under current conditions.”
For parents considering financial gifts to adult children, the calculation involves more than just available cash. It requires careful consideration of their own financial security, tax implications, family dynamics, and the potential impact on their children’s financial independence.
Mark and Linda have approximately $980,000 in registered accounts (RRSPs and TFSAs), another $350,000 in non-registered investments, and no debt. Their combined pension income provides about $95,000 annually, which comfortably covers their lifestyle needs. They’re considering gifting $100,000 to each child.
“Before making any significant financial gifts, parents need to stress-test their own retirement plan,” advises Jason Heath, managing director at Objective Financial Partners. “What happens if one spouse requires long-term care? What happens if market returns are lower than expected? How might inflation affect their spending power over a potentially 30-year retirement?”
Heath recommends working with a financial planner to model different scenarios, including longevity risk and unexpected healthcare costs, before committing to major gifts.
Canada has no gift tax, which simplifies the mechanics of transferring money to adult children. However, parents should consider these key factors:
First, gifts should be documented. While not legally required, a simple letter confirming the money is a gift rather than a loan can prevent misunderstandings and potential tax complications later.
Second, parents should clarify expectations around the gift. Is it strictly for housing? Are there strings attached? Having transparent conversations about intentions can prevent family tensions.
Third, consider the timing. The federal First-Time Home Buyer’s Incentive and various provincial programs may interact with parental gifts in ways that affect qualification criteria.
Fourth, contemplate family fairness. If one child needs more financial help than another, how will that be addressed in estate planning to maintain equity?
Beyond the mechanics, there’s the psychological dimension. Financial therapist Megan McCoy points out that financial gifts can create complex emotions for both parties. “Parents may feel entitled to input on housing choices, while adult children might experience a mixture of gratitude and shame. Clear boundaries and expectations are essential.”
Some parents choose alternative approaches to direct gifts. Options include:
Acting as a co-signer on a mortgage, which can help children qualify for better rates without immediately transferring cash.
Providing an interest-free family loan, documented properly, which can be forgiven over time or through estate planning.
Setting up a trust with specific conditions around home purchases.
Contributing to a Tax-Free First Home Savings Account (FHSA), which launched in April 2023, allowing first-time home buyers to save up to $40,000 tax-free.
After meeting with a financial planner, Mark and Linda decided on a modified approach. Rather than gifting $100,000 outright to each child, they provided $50,000 as an immediate gift plus an interest-free loan of $50,000 to be forgiven in five years or through their estate, whichever comes first.
“We found a balance that helps our children now but preserves some financial flexibility for us,” Linda explained. “The structured approach also gave us peace of mind that we’re treating both kids equitably.”
The Bank of Canada’s recent interest rate pause may eventually bring some relief to the housing market, but generational wealth transfer through housing assistance appears to be becoming a permanent feature of Canadian financial planning.
For parents considering similar moves, the key is finding the balance between generosity and self-protection. As Heath puts it: “The best gift parents can give their children is ensuring they won’t become a financial burden later. Financial oxygen masks work like airplane oxygen masks—secure your own before helping others.”
In Canada’s challenging housing market, family support has become an increasingly common path to homeownership. With careful planning, transparent communication, and appropriate professional advice, parents can help their children build equity without compromising their own retirement security.
After all, as one parent told me recently, “We can’t take it with us, but we need enough to get us there comfortably first.”
