Study Finds 47% of Parents With Adult Kids Are Helping Them Financially; Here’s Why
The older generations had to face financial hurdles but today Gen Z and millennials find it a lot more difficult to manage their finances despite having jobs. This can be attributed to rising rents, student loans, food prices, dining out, and dating trends. Another reason why they incur such expenses is that they want to live a lavish life that they can show off to their family and friends. But the loan interest rate and high housing prices make this dream burdensome and they are not even able to manage their day-to-day expenses. On the other hand, parents who raise their kids so that they can become independent have now taken control and come forward to support them financially.
Social media platforms are filled with debates on how young adults are unable to earn for themselves and survive in this competitive world due to the upsurged costs and burdens. Amidst all this, it is not easy for any parent to see their children struggling with finances and loans. Therefore, as per the report by Savings.com, around 47% of parents having a child of 18 years or more are helping them financially. Apart from the soaring prices, Gen Z and millennials are also not earning as well as their parents used to at this age. They think the challenges have become bigger and student loans are suppressing their dreams.
Seeing this, parents have come out in support of their children and are paying for their phone bills, health insurance premiums, and loan EMIs. The report further mentions that on average, parents are spending $1,384 monthly so that their kids can become financially stable and focus on their jobs and careers. Despite all of this, as per the findings, 61% of the adult kids living with their parents are not contributing anything to the household expenses which is not ethically correct.
Experts believe that helping your children is all good but sacrificing your retirement savings may not be a good idea. The report findings further state that almost 58% of the parents exhausted their financial savings or retirement funds for the sake of their children. Carolyn McClanahan, a certified financial planner and member of CNBC’s Advisor Council recommended that parents must have a good financial plan for themselves and then budget how much they can give their kids. She further advised that parents must set boundaries and a time limit till when they will be financially supporting their kids. If they don't do that, they are sacrificing their retirement plans or other financial goals. As a general rule, you should set aside money for your retirement and emergency fund first, she said.
Another expert Isabel Barrow who is the director of financial planning at Edelman Financial Engines suggested parents work out a deal with their kids. Parents must agree to financially help their kids on one condition i.e. if they are earning, they have to set aside and invest say 10% of their salary into the 401(k) scheme at work. Barrow further said, “If they have income, they have a job, they can save. That needs to be their commitment to you." Gen Z and millennials need to understand that they cannot rely on their parents financially for their whole lives as they have to overcome their challenges on their own.