Your Adult Children Could Still Ruin your Retirement

Scott Millard |

Now that your children are finished school and standing on their own two feet (or at least earning enough to pay their basic bills and meet their student loan debts), you figure that the financial risk that they may pose to you is now gone.  What if I told you that your young adult children could still derail your retirement plans and force you back to work in your late 60’s or beyond? 

As much as we hope this doesn’t happen to you, the risk is very real.  What if your twenty something child comes down with a serious illness and can no longer work?  Who will pay off their student loans, other building debt loads and pay for their living and medical expenses?  Although they’re technically “adults” now, there’s not too many parents who would turn a cold shoulder if their children got into serious financial trouble due to illness, no matter how much it would affect their own retirement.

For example, let’s assume you have a 24-year-old daughter, three years out of university and that she’s started her own small restaurant.  Although the restaurant is doing well, your daughter has amassed business loans, student debt and other cost of living expenses.  If this same daughter develops cancer and the treatment program not only requires her to not work for the next two years, but also weekly trips to Vancouver, who’s going to foot the bill?  There will be considerable expenses piling up for both living costs, debt repayments and medical and travel expenses.  These costs could easily eat up a good portion of your retirement nest egg in these two short years. 

While from the outside you might look at the above situation and think that she’s an adult now, and that whatever costs she incurs are up to her but let’s be honest – how many of you would step in and do whatever it takes to make sure your child gets that care that she needs?  What if the best treatment available for the illness is outside of Canada?  Would you be willing to derail your own retirement to pay for it? 

One simple solution that can provide protection from this type of event is setting up a critical illness insurance policy on your child.  If the child is diagnosed with one of the many covered conditions (including cancer, heart attacks, strokes, major organ transplants, loss of limbs and many others), the insurance policy pays out a lump sum of cash in the amount of insurance purchased right away.  This money comes to you tax-free and can be used for whatever expenses you see fit with no limitations. 

In the above example of a 24-year-old daughter and assuming $50K of coverage, the insurance policy would cost approximately $17 per month for term coverage or $30 per month if you wanted the price fixed for her lifetime.  Critical illness insurance costs significantly more than life insurance but there is good reason for that – some estimates say that 1 in 3 Canadians will develop one of the conditions covered by this type of policy during their lifetime.  You can also set up a policy so that if you don’t make a claim, all the premiums paid are returned to you down the road.        

For those still working with younger children, it makes even more sense to set up a policy now.  That way if illness strikes, you can have the financial resources on hand to take time off work and get your child the treatment that they need.  The additional benefits of setting this up at a younger age are that you can lock in the low cost for life and ideally transfer the ownership of the policy to your child once they’re able to take over the payments themselves. 

While not right for all situations, critical illness insurance is vastly under-utilized in Canada and this is leaving many of us at great risk.  The above example of setting up a policy on your child is only one of the many uses for this important coverage and if you haven’t done so already, you should speak to a financial professional to see if this coverage is right for you and your family.              


Scott Millard, Senior Executive Consultant, IG Wealth Management
Investors Group Financial Services Inc.


This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities.  Scott Millard is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant. Insurance products and services distributed through I.G. Insurance Services Inc. Insurance license sponsored by The Canada Life Assurance Company.