Author: Moe Rahimian

If you were born after 1940, you probably grew up in a nuclear family: mother, father, 2.3 children. Maybe grandparents or other relatives lived nearby but not under the same roof. Although the nuclear family seemed the norm for middle-class Americans, it was actually an aberration lasting only a few decades. For most of human history, family members of all ages lived together, and they continue to do so in much of the world. In the United States, large social and economic changes have not only redefined family — think of blended families, same-sex marriages, and children born to surrogate mothers — but have also revived multigenerational living with some modern adaptations.ADVERTISING

WHY DIFFERENT GENERATIONS ARE LIVING TOGETHER

Each family is different and has its own story, but several reasons contribute to the appeal of generations living together.

Economics is probably the major driver of multigenerational living. Unemployment, loss of housing, credit card debt — all the uncertainties of a changing economy have driven many families together to share resources and space.

Another reason to share a home is the changing needs of aging relatives. Living together can alleviate the strain on family caregivers who must maintain their own home and that of a parent or other relative. The needs of older people who can’t live safely by themselves often can be addressed more easily and economically in a shared household than if they lived in a separate home.

And as an advantage for the younger generations in the home, older people can contribute to the household economy and help with some tasks, particularly child care. These arrangements may especially benefit children as they get to know their grandparents intimately and not just on holidays and visits. The whole family may grow much closer as a result of the shared experiences. But these positive outcomes are not guaranteed and do require effort and patience.

On the flip side, prolonged education and poor job prospects have created the Boomerang Generation, young people who have not established households of their own and have returned to feather their parents’ formerly empty nest. This generation includes those who have married and divorced, or who had children while unmarried, and move home with the grandchildren in tow. This way, younger people have a place to live, can establish themselves financially, and can help their aging parents at the same time.

DEFINING FAMILY HOUSEHOLDS BY GENERATION

The Pew Research Center, which studies social and demographic trends, identifies several different types of households. Which one describes your family now and which one would describe it if you all lived together?

• One generation: A one-generation household consists of people of the same age group: a married or cohabiting couple, a single person, siblings, or roommates. These people are not necessarily young. A married couple may be in their 80s, and older siblings may live together.
• Two generations: A two-generation family household includes a parent or parents and their child or children under age 25. It may include stepchildren from different marriages. A two-generation household can also be made up of a person over 60 and a parent in his or her 80s or 90s.
• Multigenerational: A multigenerational household can include
  • Two generations: Parents or in-laws and adult children (or children-in-law) age 25 and older; either generation can “head” the household.
  • Three generations: Parents or in-laws, adult children (and spouse or children-in-law), and grandchildren.
  • Skipped generations: Grandparents and grandchildren whose parents are dead or unable to care for them. These are sometimes called “grandfamilies.”
  • More than three generations: The ages in the household can range from infancy to extreme old age.

The more generations living together, the greater the opportunities for sharing knowledge and history. Many families find that they enter the arrangement for economic or caregiving reasons but remain in it because they enjoy the closeness of family interactions. But possibilities for friction and dissension also exist.

The multigenerational households of older times were not necessarily happy with the arrangement or unaffected by intergenerational or interpersonal strife.

The topic of who inherited the family farm in 19th-century America can be just as contentious as current disputes over homes and other assets. Addressing early on the ways in which everyone’s needs will be met and clearly stating everyone’s responsibilities will go a long way toward ensuring a cooperative arrangement. In later sections I suggest specific ways to accomplish this.

In 1940, one quarter of Americans lived in households with at least two adult generations, usually parents and grandparents, as well as minor children. By 1980, that share had declined to 12 percent — the intervening decades were the high point of the nuclear family. But in 1980, that trend started to reverse, and since then the share of all Americans living in two-generation households has continued to increase.

According to the Pew Research Center, in 2014 an estimated 60.6 million Americans, or 19 percent of the total U.S. population, lived in a household that contains at least two adult generations or a grandparent and at least one other generation.

The Pew Center attributes this growth to the rising share of immigrants in the population and the rising median age of first marriage.

Although this shift affects all ages, it is particularly significant for older adults and 25- to 34-year-olds. In a broader age group — 18–34 — living with parents was more common than other arrangements for the first time in 130 years.

Another measure of this change: In 1900, only 6 percent of people 65 and older lived alone, whereas 27 percent currently do. However, people are living much longer than they used to but with many chronic health conditions. Older people who live alone are less healthy and often feel more depressed than their counterparts who live with a spouse or others.

CONSIDER FAMILY REACTIONS BEFORE MAKING A DECISION

A move to intergenerational living typically involves the entire family. If you’re planning to combine households, think of how the other people in your life — spouse, children, siblings — are affected by this decision. Having an in-law, a grandparent, or grown children living in your home is not the same as having them visit. Whether you are having an aging parent move in with you or you are the older person about to move into your child’s home, ask yourself the following questions:

• Will the other people in my life have to give up space to accommodate another person?
• Will children still feel free to bring friends home?
• Will family members have additional responsibilities?

If you’re considering bringing a parent into your home, how your siblings react is a particularly sensitive issue. A lot depends on your prior relationship and their relationship with your parent. One sister may feel relieved not to have to take on the responsibility; a brother may worry that being in your home may undermine his relationship with your parent. Money is often a contentious issue between siblings. When dealing with siblings, consider the following questions:

• Who is going to be financially responsible?
• If the person you’re bringing into your home plans to contribute to the household and then retires or suddenly can’t contribute for other reasons, will the financial responsibilities change?
• Will a parent’s contribution to buying a home or supporting a household take money away from an expected inheritance?
• If the move involves the sale of the parent’s home, how will the proceeds be used?

These issues are all best addressed at the outset, although they may have to be revisited as circumstances change.

If you’re the older person moving in with an adult child, ask yourself the following:

• What are my main concerns?
• Will constantly being around grandchildren and their behavior annoy me?
• Will I be able to accept the help that is part of the package?
• Am I concerned that my son or daughter has never been a good money manager and may not use my financial contribution wisely?

These issues are best discussed before you make a move.

The following is perhaps the most important question you need to ask yourself before going further in your fact-finding: Is this something I want to do or something I feel I should do? If it’s something you want to do, and the primary person you’re concerned about also wants to do it, then you have a good beginning.

If it’s something you feel you should do, that doesn’t mean it’s a bad idea. Just take a good look at your worries and negative feelings. You may be making some assumptions about what it will be like that won’t be borne out. Talk to others in this situation to see how they have handled the changes.

A trusted family friend or counselor may be able to help you sort out your feelings and to help allay your concerns. But if this honest appraisal results in increasing rather than relieving your anxiety, this may be the time to acknowledge that the arrangement isn’t going to be successful.

Involving your children in money-management discussions and decisions is extremely valuable. Children can be helpful or very challenging when it comes to effectively managing your money. Here are some ways you can instill healthy money-management behaviors in your children:

Give children specific roles with regard to daily money management activities. Ideas include opening and sorting the mail or depositing everyone’s change (coins) into the family’s “vacation fund” jar each day.

Involve children in periodic responsibilities, such as helping to pay bills by writing checks and stuffing envelopes, clipping coupons from the Sunday paper, going into the bank and interacting with the teller, or making decisions and purchases for the family when grocery shopping.

Actively engage your children in shopping. For example, let your children carry a fistful of coupons. Let them help you search for the tuna fish that is on special: six cans for the price of three. Make a game of these savings and let your children see your enthusiasm. Your child can hand over the coupons to the cashier and with you look at the receipt to see the results of their shopping adventure.

Help children discover that compromises are normal. No one can have everything they could ever want or dream about. The smarter you are about each and every money management decision, the more you’ll have to work with for the things that matter most.

Allow your children the opportunity to earn their own money and make their own decisions about what to do with it — with minimal influence on your part. If it isn’t dangerous or illegal — regardless of how practical you think it is — allow them to proceed. This is the best time and place for your children to practice managing their money. Having this kind of responsibility and autonomy — while living under your roof — gives them opportunity to feel the pain of making bad decisions, but they’ll learn valuable lessons about money management while you’re nearby to provide guidance.

Engaging your children in the “joys” of being involved in day-to-day money-management decisions teaches them to work as a team by providing them with responsibilities. As a bonus, you probably will hear fewer pleas for candy or toys because everyone had fun and learned extremely valuable lessons.

Think of ways your children are (or could become more) involved, from earning their own money doing chores around the house to making decisions about spending money.

For example, say that your daughter is turning 10 in a couple of months. This is an occasion for a big birthday bash. Explore all the different, fun things that she’d like to do, while staying within a set budget. You pick the budget amount and let her propose the possibilities she has explored.

Or say that your son wants a car when he turns 16. What options are available to help him to acquire a car and pay for insurance, gasoline, and upkeep? Are you willing and able to contribute financially? If so, to what extent can you transfer some or all of the very grownup responsibility to your son?

Collected from: Dummies Insider

A budget in the spring, an election in the fall… Political analysts were asking themselves a lot of questions before the latest federal budget was tabled. Now the answers are here.

The budget tabled on March 19 by federal Finance Minister Bill Morneau carries on where the three previous budgets left off, as far as managing the budgetary balance is concerned. Deeming the national debt – which stands at about 30% of GDP – to be within its established guidelines, the government has presented a fourth deficit budget in as many fiscal years and doesn’t seem to consider a balanced budget to be a priority for the next five years.

This recourse to deficit spending may be what has allowed the government to propose a number of new tax measures for individuals.

1. To begin with, the government would like to encourage Canadians to develop their careers by acquiring new professional skills. With the new Canada Training Credit, individuals will accumulate a yearly credit balance, up to a lifetime limit of $5,000, that could be used to cover part of the cost of job training. Individuals with an annual income of $147,667 or less (i.e., the third tax bracket) will be eligible and must use their credit balance before the end of the year in which they turn 65. Another training support measure: a new Employment Insurance benefit will now provide four weeks of income support for people taking a training leave from work.
2. On another note, one new measure may give business owners an incentive to replace their fleets with zero-emission vehicles. Newly purchased electric battery, plug-in hybrid or hydrogen fuel cell vehicles will now be eligible for a full tax write-off in the year they are put into use. Light-, medium- and heavy-duty vehicles will all be eligible. Note that for passenger vehicles, capital costs will be deductible up to a limit of $55,000 plus tax. Canadian individuals, on the other hand, will be eligible for a purchase incentive of up to $5,000 for electric battery or hydrogen fuel cell vehicles with a manufacturer’s suggested retail price (MSRP) of less than $45,000. Note that, for individuals, hybrid vehicles are not eligible.
3. Young high-growth companies and startups that include stock options in compensation packages for key employees may want to talk to their tax specialists about the new rules the government has announced in this area. More details should be forthcoming in the next few months.
4. With regard to other specialized financial products, note that if you hold units in mutual fund trusts, it might also be appropriate to consult your tax specialists, since the minister has announced a tightening of the tax rules for this product.
5. The government has taken note of the situation of retired people who have significant retirement savings, but are worried about their longevity risk – i.e., the possibility that they will outlive their money. New rules have been announced to allow savings in registered plans to be used to purchase a deferred life annuitythat would take effect at an advanced age – 85, for instance – to provide a guaranteed lifetime income from that point on.
6. Among the measures intended to allow households to build their financial assets, two in particular are aimed at people looking to buy a first home. The first is an increase in the amount that can be used for this purpose under the Home Buyers’ Plan (HBP): it will now be possible to use up to $35,000 from an RRSP for this purpose (the current limit is $25,000). The provision that will draw the most attention, however, is the new program enabling the Canada Mortgage and Housing Corporation (CMHC) to offer a “shared equity mortgage” as a way of reducing the borrowing costs for a residence. Under this lending program, up to 10% of the cost of buying a home would be shared between the purchaser and the CMHC. The program will be called the “First-Time Home Buyer Incentive.”
7. Many Canadians, even those with substantial incomes, have people close to them whose personal finances are more vulnerable, such as aging parents or people with disabilities. If you are in this situation, you might want to learn about the new provisions that could make a difference for such people, and ensure that they take full advantage. In particular, these include an increase in the Guaranteed Income Supplement for seniors who continue to work and improvements to the Registered Disability Savings Plan.
8. Finally, if you have a business or home in a remote or rural area and the quality of your Internet connection is a concern, be aware that the government is aiming for 95% of Canadian homes and businesses to have access to Internet speeds of at least 50 Mbps by 2026.

A variety of other measures could be of interest to you, especially if you are in the farming business, where a $3.9 billion support program has been announced. For anything not covered here, don’t hesitate to consult the federal government’s budget website!

Published By: Insurance Journal

Author: Andrew Rickard 

Date: June 28, 2016  09:53 a.m.

Will you die in the class you were born? Research conducted by Statistics Canada on intergenerational earnings has found that Canadians do not have the kind of upward mobility that previous generations may have enjoyed.

Comparative studies of intergenerational earnings and income mobility tend to rank Canada as one of the most mobile countries among advanced economies. However, in the Statistics Canada research paper Intergenerational Income Transmission: New Evidence from Canada, authors Wen-Hao Chen, Yuri Ostrovsky, and Patrizio Piraino argue that literature dealing with the subject has not paid enough attention to the relationship between the lifetime earnings of children and their parents. The problem is one of lifecycle bias, which is to say other studies considered earnings levels at certain ages (e.g., when people were younger and therefore earning less money) and failed to account for income in later life.

To link together Canadian children and their parents

The researchers used tax records to link together Canadian children and their parents, and observed that intergenerational persistence tends to be greater when market income (i.e., the sum of earnings, self-employment income and asset income) is measured. “This suggests that other mechanisms, such as transmission of jobs or entrepreneurial skills, may also be at work,” say the authors.  While the paper found that path to the top of the scale of was “quite challenging” for sons born to low-income fathers, it also found that these same sons still appear to have a good chance of moving into the middle class; the authors say this may be due to the influence of social institutions.

If a father and son have an intergenerational correlation rate of 0, that means the parent’s circumstances has no influence at all over the child’s future income level; the higher the correlation rate, the more influence a parent’s background has on the child’s future earnings and the more static the class system. The study found that Canada still has a very low correlation rate, but concludes that it is not quite as low as some other studies have found.

Canada is still a mobile society

“The results from the analysis suggest that Canada is still a mobile society, but not to the same extent as previously thought,” reads the report. “The new estimate of the father–son earnings elasticity is about 0.32, which is noticeably higher than the values previously reported in the literatures (which have been in the neighborhood of 0.2): lifecycle bias alone explains about two-thirds of the discrepancy between the early estimates and the new result.”

Published By: Insurance Journal

Author: Andrew Rickard 

Date of Publication: July 18, 2016  01:29 p.m.

The Fraser Institute argues that Australia’s system of mandatory individual retirement saving accounts is preferable to the Canada Pension Plan’s (CPP) collective model.

In an article posted to the Fraser Institute web site last week, authors Charles Lammam and Hugh MacIntyre describe the recent agreement to expand the CPP as “wrong-headed” and “largely unnecessary” on the grounds that most Canadians are already adequately prepared for retirement.

The Australian model

Instead of relying on the existing collective CPP model for additional mandatory contributions, the authors say that if politicians really wanted to improve the Canadian retirement system they “should have looked beyond our borders and considered pension models from other countries requiring their citizens to save for retirement”. In particular, Lammam and MacIntyre point to Australia’s retirement scheme which requires employers to contribute 9.5% of an employee’s ordinary earnings to individual retirement accounts.

Transferable to dependents

The article notes that Australian accounts are more flexible in that they have limited rules around asset allocation and investment strategy, and also allow withdrawals prior to retirement for medical emergencies and during times of financial hardship. What’s more, at death Australians may transfer their full account balance to their dependents as a tax-free lump sum.

“These important benefits are unavailable in the collective CPP model. Indeed, the CPP lacks the flexibility and choice that Canadians enjoy from private saving vehicles such as RRSPs, TSFAs, and other investments,” reads the article. “This is particularly relevant in light of the fact that higher mandatory CPP contributions will be offset by lower private savings. Employing the Australian model could at least minimize such drawbacks.”