Household Transfers: Important to Many

Have we mentioned that 30 is the new 20? Those of you with adult children may know what we mean! Statistics Canada has released an article, Measuring Voluntary Interhousehold Transfers in Canada, based upon data collected in 2008. The research looks at the assistance, financial or otherwise, that some Canadians receive from friends and family members. These are voluntary payments and they are made with no expectation of repayment. They are most often small, regular payments but they can be larger, emergency transfers as well.

In 2008 there was $8.5 billion voluntarily transferred between Canadian households; this is twice as much as court-ordered alimony and child support payments and similar in size to social programs such as social assistance and child tax benefits! Payments are generally made by relatively well-off households to less economically stable households. In general the households giving the resources send a median of 3% of income to the receiving households, for whom the transfer represents 5% of household income.

In Canada, between 1998 and 2008, the proportion of households that sent voluntary transfers to other households rose from 31% to 41%. In comparison, real household income increased 33% and charitable donations rose 32% over the same period.

You can probably come up with many examples of voluntary interhousehold transfers. How many of us have given money to an adult child for a damage deposit or downpayment? How about sharing a car payment (but not the car!) for five years? The safety net that we provide our children is an important one, as long as it is gradually lowered and financial independence is on the horizon.

Many newcomers to Canada send money home to relatives on a regular basis ñ living a frugal lifestyle here so that others may benefit. Increasing numbers of baby boomers care for their parents in real ways, providing transportation, household assistance and financial backing in order to ensure a comfortable and secure old age for those who supported them. Sometimes assistance is given to friends and neighbors who are struggling to cope with serious issues. We can all find ways to help in some small way, and together we can make a big difference.

ADDITIONAL EDUCATIONAL RESOURCES:  The Smart, Savvy Young Consumer - Available in November, 2011!