It’s not uncommon when working with clients to hear the comment “once my children move out, I’ll begin to save more for retirement.” After all, according to Canadian census data, 34.7 per cent of young adults between the ages of 20 and 34 were living with at least one parent. 
If your children are at home, you may be wondering whether they’ll move out before you retire. If your children do move out, will you actually begin to save more?
It’s an important question because many studies of retirement readiness assume Canadians will save at higher rates after their children become financially independent. Parents whose grown-up children had not flown the coop will accumulate 24 per cent less in financial assets and 23 per cent less in savings than those lived on their own. 
Gas, electric, water, gasoline, insurance, groceries – it may be hard to fathom the savings that arrive on your doorstep when children depart. According to US data from porch, the average adult child can cost parents approximately $459 per month - kids are expensive. As they become financially independent, parents can often find themselves with a substantial amount of extra money on their hands. When this occurs, there are really two basic choices parents can make: Spend more on themselves or increase their savings. 
There is no right choice in these cases. Your decision on what to do should largely depend on your given circumstances.
An individual who is close to meeting his or her retirement goal, and has a high probability of having enough savings to live comfortably throughout retirement, may decide to splurge and spend more now. An individual or couple at the other end of the spectrum – with too little set aside for retirement – may make an entirely different choice and dramatically increase savings.
For fun I thought I’d illustrate what this extra savings could mean to the total amount of money inside an RRSP account, based upon varying retirement dates.
Obviously, the more time you have the larger the impact the savings will bring. Knowing the impact of your adult child moving out and what this means to your financial situation starts with knowing where you stand today.
Unfortunately, few Canadians have ever figured out how well they are prepared for retirement, even if they have been saving for years. Before going out and spending the extra cash that empty nesting provides, it’s a good idea to understand what amount of money will be needed for your life in retirement. This will likely require speaking with a financial professional or by doing some serious homework. You’ll be happy you did.
- Brandt Butt, Investment Advisor, CIM®
Brandt Butt is an Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Brandt Butt who is an Investment Advisor for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.