The 40-year-old single man, still renting a small apartment, had a lot to say to the journalist’s microphone.
“Being 40 is strange, because I and many people of my generation have not achieved the goals that our parents achieved at that age,” he said. “How can you be an adult when you don’t own a house?”
And the journalist added: “Many people have not reached the standard of living of their parents, and may never live as well as them in the future.”
Are these clips from a viral TikTok post?
Not at all. They are from the May 1986 issue of the magazine Time. And the generation in question is not millennials, but baby boomers.
Financial writer Michael Batnick, who unearthed this old issue of Time recently, notes that the total value of American baby boomer assets has grown from $4 trillion in 1990 to more than $79 trillion today.
“It turned out [que les baby-boomers] “got through it,” he concludes.
Last week, I unwittingly caused a storm in my inbox. Many of you responded to my seemingly radical post that we should give our children the freedom to build their own financial success.
You’ve made it clear to me (politely, but firmly) that you really, really want to give large sums of money to your adult children.
Louise writes:
“I gave $80,000 each to my two youngest to buy a condo. At 29 and 31, they have salaries of about $60,000, and I didn’t see the day when they would be able to save up their down payment.”
Peter writes:
“We have decided to give a large annual sum to our four children to pay their mortgages from our savings. We believe that at 40, this money is more useful to them than an inheritance received when they are 60 and their children are adults and independent.”
Manon writes:
“We are parents for life. My children are very grateful when I help them. If elderly parents gave money little by little to their children, they might have more services and help from them… Having $500,000 at 90 that I don’t use, what does that mean?”
That said, I wasn’t alone in my gang either. Several readers said they were opposed to large financial gifts to children.
Jocelyne writes:
“If kids don’t have enough money for a down payment, they won’t have enough for maintenance either. A home is very expensive. Good luck to parents who are still financing their offspring and supporting mortgage payments and the rest!”
A reader writes:
“Help your kids buy a house? My answer is no. I lived in an apartment for a long time. It was normal back then… There was no shame in it. Today, we have a small house, but we didn’t ask anyone to help us. Now, it seems to be the norm. My sister’s son accused her of not wanting to lend him (read give) $35,000 for his down payment. He said his in-laws did it… Horrible.”
As my text last week said, there is no “right” or “wrong” answer.
What annoys me about the phenomenon of large gifts of money to one’s children is the implicit admission that getting rich is harder – if not impossible – today. That adults must step in and lower the height of the financial basketball hoop to allow other adults to score points.
As the magazine excerpt shows Timeeach generation believes it is living in an extraordinary situation.
Many have cited high real estate prices. I would like to add a nuance, and I say this knowing that this is a loaded topic: expensive homes and a mortgage are probably not the ideal vehicles for building wealth and improving one’s situation when one is short on money in life.
A house is a form of forced savings. But jumping into the adventure too early, or with too little money saved or too little income, can also become a form of forced impoverishment.
I once owned a duplex. The down payment, interest costs, maintenance costs, insurance and other unexpected expenses add up. Despite very favorable years for real estate, I realized that, net of fees and inflation, my dollar invested in the duplex experienced less growth than the dollar invested in diversified financial investments.
Along the same lines, New York University calculated that from 1928 to 2023, U.S. stocks delivered an annualized return of 6.6% after subtracting inflation. Residential real estate delivered a return of 1.2% after subtracting inflation.
Over a horizon of almost a century, a dollar in stocks has therefore grown five times faster than a dollar in real estate (we are talking about the price of houses here, not the yield of a rental property portfolio).
Yes, in recent years, real estate has grown above its historical average. As a result, not having a mortgage at 22 (aided by a gift from mom and dad) is now seen as a sure sign that you have failed in life.
For my first book, Millionaires Are Not Who You Think They AreI interviewed a dozen Canadian millionaires (and one billionaire). The majority had incomes of less than $100,000 per year. None received gifts from their parents. None made their fortune from their homes. The value of their homes accounted for only a small portion of their net worth.
These millionaires made me realize that renting and investing in financial assets can be a great way to build wealth. It can allow us to increase our freedom and do things like one day buy a place to live from a position of confidence, not by throwing every penny we own at it and praying that condo fees or interest charges (or both) don’t increase.
PWL Capital has a tool to compare your net worth after several decades between renting or buying through mortgage debt. You can explore different hypotheses.
Check out PWL Capital’s tool (in English)
Now, whether we receive a parental gift or not, how do we know if we can afford to buy a house? How do we know how much we can pay per month? And be sure that we are making the right choice? That is the subject of my text next week.
This time, I think we’ll get along well.