Feb 16, 2024
Once upon a time you could safely assume a 40-year-old was paying their own bills without help from Mom and Dad. Not anymore.
These days, 65% of parents provide some sort of financial support to their kids between ages 22 and 40, according to a recent USA Today study.
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Parents shell out an average of $718 a month to help their fully grown kids, according to the study. The top three items parents foot the bill for are groceries, housing (that is, help with rent or mortgage, or letting the grown-up kiddies live at home) and a phone plan, the results show.
If this state of affairs surprises you, perhaps it shouldn't, given the distribution of wealth in America. Recent data from the Federal Reserve shows that baby boomer generation, to which many millennials' parents belong, control more than 50% of the wealth in the U.S.; whereas the hapless millennials lay claim to less than 10%.
You might say that with such great wealth comes great responsibility. But some experts, including personal finance guru Suze Orman, take a different view.
Younger generations under financial pressure
Over half of the total parents surveyed believe that the tough economic climate means their adult kids need more financial support. And they aren’t wrong.
The Pew Research Centre discovered that it’s taking young adults much longer to reach key milestones, like having a full-time job and living on their own. Their most recent data shows that 68% of 25-year-olds were living outside their parents’ home in 2021, compared with 84% in 1980.
Between student loan debt, high rents and wage stagnation, it’s taking young adults longer and longer to become financially independent. And 84% of parents that USA Today surveyed are happy to support their kids if they can help them get through this tough time.
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Supporting kids can hurt parents
Even if parents don’t mind giving their kids a helping hand, 1 in 3 told USA Today that it puts them under “financial strain.”
With the aging population, more and more people are finding it hard to save for retirement. In fact, 28% Americans have nothing saved for retirement, according to the most recent Federal Reserve numbers.
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Experts say you need to have enough money in retirement so that you can withdraw between 4% and 5% from that nest egg every year. That’s quite a bit of money to save – especially if you’ve pouring your extra income into your kids.
So which is more important to you: yours or your kids’ financial future?
Suze Orman says stop
Personal finance celebrity Suze Orman has heard this all before – and she’s not a fan of it. Orman worries for the future retirees who are spending possible 401(k) contributions on their kids’ lives.
She wants parents to prioritize their own wealth. When she sat down with Moneywise in May, she advised parents to say this to their adult kids:
“I am no longer your bank account! I'm getting to the point where I need my money to be able to support myself. You are old enough now to go out and figure it out. So don't come to me for money.”
Orman also encourages you to cut your expenses so you can aggressively save and reap the rewards of compound interest in your 401(k).
Social Security isn’t enough to support you in your old age, so you may have to kick your kids off the account in order to look out for yourself.
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Sabina Wex is a writer and podcast producer in Toronto. Her work has appeared in Business Insider, Fast Company, CBC and more.
