The bank of mom and dad is in high demand nowadays. A new global survey commissioned by HSBC says 37 percent of millennials borrow from their parents in order to purchase their first home.
The survey included participants from around the globe including 1,000 young Canadians. The poll revealed some shocking findings including 73 percent of millennials intend to buy a home in the near future however they have yet to even save for a down payment. And more than a quarter of millennials indicated they have yet to make a budget for the biggest purchase of their lives. The findings clearly suggest the parents of millennials are playing an instrumental role in helping their children buy their first home.
“The findings from the survey are troubling, to say the least. The reality is if you intend to buy a home, you should make your budget your top priority. It is important to not only think of your down payment for your home however think of the entire financial picture,” says Jeffrey Schwartz, executive director, Consolidated Credit Canada.
“You need to sit down to think about how you are going to keep your home after you get the keys in your hand. How are you going to pay for your mortgage and other housing-related bills? What are you going to do when a financial emergency arises? Potential homeowners have to think long term and create a budget to reflect this reality,” says Schwartz.
Millennials use the Bank of Mom and Dad
The survey revealed millennials withdrew from the bank of mom and dad more than once. Twenty-one percent of respondents indicated they have called on their parents’ bank account when a financial emergency arose after they purchased their home.
How are Millennials Buying Homes
If you are in the market for a home and you are a millennial and you want to start your path to homeownership on the right track, Consolidated Credit Canada recommends the following:
Create a game plan
Sit down and create a budget to map your path towards homeownership. Your budget should include your down payment as well as how much money you will need to keep your home. Factor in the projected cost of your monthly mortgage payment, your household bills. That includes water, taxes, insurance, food, emergency funds, etc. The more detailed your budget is, the more likely you will not be caught off guard with unexpected expenses.
Start saving now!
If your goal is to purchase a home in the near future – you need to start to save now! Create instant savings for yourself by cutting back on excessive spending. Focus on your end goal of homeownership and make it a priority. Understand what your needs are and ditch your lavish wants by the wayside. With any improvement in your cash flow, deposit it into your savings account. Spend within your means and watch your savings grow!
Buy ONLY what you can afford
Buying more home than what you can afford is a tried and true recipe for a debt disaster. So stay within your financial means. For some, this means purchasing a home outside of the city or in the suburbs. It may also mean delaying your plan until you have more saved. Wherever you end up buying a home, make sure you resist the urge of buying more than what you can afford.
Take a strangle hold of your debt
The reality is some millennials are plagued by a mountain of credit card debt. If your debt load is eating up all of your money – then it is time to get some help from a trained credit counsellor.