Nearly half of American parents continue to financially support their adult children, reflecting a growing trend that underscores the economic challenges faced by millennials and Generation Z. As the cost of living continues to rise, parents find themselves contributing an average of $1,384 per month to help their offspring with expenses ranging from buying food to paying for a cellphone plan or covering health and auto insurance.
This phenomenon, highlighted in a recent Savings.com report, signals a broader societal issue. Today’s young adults are not only earning less than their parents did at a similar age, after adjusting for inflation, but they are also burdened by larger student loan debts. Consequently, many parents feel compelled to step in, with 47% providing some level of financial assistance to children over the age of 18.
The generosity of these parents, however, does not come without consequences. With 58% admitting to compromising their own financial security to aid their adult children—a significant increase from 37% a year earlier—there is a clear need for establishing limits. Financial planners advocate for parents to “create boundaries and figure out a balance,” prioritizing their retirement and emergency funds. Carolyn McClanahan, a certified financial planner, stresses the importance of parents having “a good financial plan for themselves, then budget how much they can give their kids,” while also setting parameters and a time frame for this support.
Experts suggest a collaborative approach where financial support is conditional upon the children’s efforts to secure their own financial future. For instance, Isabel Barrow, the director of financial planning at Edelman Financial Engines, advises parents will offer some financial support to their children, if their kids are also making decisions that support their own financial future in other ways, such as contributing 10% of their salary to a 401(k) at work.
The issue is further complicated by a sense of obligation that many parents feel. A CreditCards.com poll revealed that during unusual circumstances, like the Covid-19 pandemic, parents often dug into their own finances to support their adult children. The survey showed that 45% of parents helped their adult children financially and that 79% said they shared money they would’ve used for their own personal finances.
Relevant articles:
– 47% of parents still financially support adult children, study finds. Here’s how much they spend, CNBC
– Dealing with a Financially Irresponsible Family Member, incharge.org
– 6 Ways You Can Help Your Adult Children With Debt (without paying it), sixfiguresunder.com