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Why young adults are relying on their parents for extra cash

Young adults are taking longer to reach the same key milestones their parents did, such as buying their first home, getting married or having kids.

While they’re more likely to be college graduates, work full-time and earn higher wages than previous generations, they’re also burdened with heavy student loan debt and are grappling with America’s ballooning cost of living at a time in their lives when they should be building wealth.

In 1992, the median amount owed on student loans (adjusted for inflation) hovered between $6,000 to $7,000. This number surged to $16,000 to $20,000 for borrowers in 2022.

Mortgage rates may have fallen from last year’s historic high to the mid-6% range, but the median home still sold for more than $403,000 in December, according to Redfin. In addition, young adults in the Pew study who do own homes are dealing with costlier mortgages than their counterparts back in 1992.

It’s no wonder about a third of young adults still live with their parents, and the numbers are even greater for those under the age of 25, coming in at 57% of those surveyed.

But even once they eventually fly the coop, these young adults often still turn to the ‘bank of mom and dad’ for help. A previous report from the National Association of Realtors’ Profile of Home Buyers and Sellers revealed about 1 in 5 buyers used a cash gift or loan from their family or friends for their down payment on a house.

Most respondents in the Pew study point to household expenses, their cell phone bills or streaming service subscriptions, being paid off by parents. Others said they received financial help on their rent or mortgage payments, medical expenses or education.

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Can parents afford taking on the extra expenses?

While America’s young adults struggle to find their feet in today’s rocky economy, their parents are more likely to be able to weather a potential financial storm.

People over the age of 55 currently own about 73% of the nation’s wealth, while those above 70 hold 30%, according to Federal Reserve data from the third quarter.

Experts suggested rising home equity and a strong stock market have helped older generations build their wealth — since they’re much more likely to be homeowners and invest in the stock market — while younger Americans fall further behind.

"Young persons [sic] who haven't had the time to save money and to buy a home, they are not seeing that same kind of increase in wealth. But [for] existing homeowners, it has been an absolute boon for them," the Heritage Foundation economist E.J. Antoni told Fox Business in December.

This means many older Americans have the spare cash to help their adult kids out. But this isn’t always the case — half of parents with lower incomes who provided financial help to their young adult children in the past year admitted this hurt their own finances. About 37% of middle-income and 22% of higher-income parents said the same.

Many financial experts claim it’s important for parents to focus on their own needs first, like saving for retirement.

Certified financial planner Jeff Rose told Moneywise last year that he’s seen some parents pay for their kids’ college tuition, when they could have used the same funds to invest and benefit from compounding interest.

And, while there’s nothing wrong with your kids still living at home, they need to contribute financially to the household in some way as well — whether that’s buying groceries or helping to pay off the mortgage or rent.

It’s also important that you’re helping your adult kids pave the way toward financial independence, by teaching them good financial habits, like paying off their credit cards in full and on time or spending wisely and saving for the future.

A third of young Americans said their parents didn’t do enough to prepare them to be independent adults, according to the Pew study.

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About the Author

Serah Louis

Serah Louis

Reporter

Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.

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