Here's How Different Generations View Parents' Financial Support
There are several milestones on the way to becoming an adult—getting your driver’s license, turning 18, finishing college, getting your first “adult” job. Some come with additional expenses—gas for the car, insurance and even a vehicle. Other milestones generate income to cover such expenses.
It becomes a balancing act, and it might take time to reach the point where the income exceeds expenses. Young adults today face economic challenges such as high inflation, stagnating wages, increasing student debts and soaring housing prices, all of which make achieving financial independence difficult.
Supporting adult children financially has become a common practice in modern times, with a significant number of parents making sacrifices to help their adult children. According to a recent Bankrate report, 68% of parents with children age 18 or older have provided financial assistance, and 31% have made significant sacrifices to support their adult children.
There are differences in what that support looks like and when each generation thinks it should taper off and end. Key differences from the survey by generation include:
- Most parents believe young adults should become financially independent at age 20 to 23.
- Gen Z adults think they should start paying for housing, cellphone use and credit card purchases by age 21, while their parents suggest age 19 for these expenses.
- Gen Z respondents think you should be responsible for paying your car insurance starting at age 22, while baby boomers believe 19 is the average age young people should begin paying their auto insurance premiums.
- Finally, according to Gen Z, the average age to start paying for housing is 23, while baby boomers believe you should be doing that when you turn 21.
Another study, conducted by Savings.com in February, had the following key findings:
- Fifty-one percent of parents financially support an adult child. Excluding parents whose children might have a disability, 45% of parents of adult children provide financial support for at least one grown offspring. Fifty-two percent of kids ages 20-24 were receiving financial parental support, 17% of ages 25–29, and 19% over age 30.
- Among parents providing support, the average monthly total exceeds $1,400. Groceries, cellphones and rent/mortgage are parents’ most common support categories. Seventy-six percent helped with groceries, 63% covered their kid’s cellphone bill, and 56% gave money to cover their rent or mortgage.
- Twenty-one percent of parents providing support are helping with their kids’ student loan payments. On average, they contribute $245.
- Sixty-seven percent of Gen Z’s parents provided support for health insurance or health care, while only 15% of millennials’ parents provided this support.
- Forty-three percent provided support for leisure or vacations. The breakdown is that 50% of Gen Z’s parents provided support, while only 29% of millennials’ parents did.
This all makes sense in that those still in college or just entering the workforce have different earnings expectations, and it can be difficult to meet all of life’s basic needs. The other trend is that more young adults are living at home. In 1960, about 9% of people ages 25 to 35 lived with their parents; by 2022, that figure was nearly 16%. More than half of the children in the 18-24 age range live with their parents. Our oldest son lived with us for about eight months after he graduated from college. It was a way for him to build an emergency fund in a short time.
While providing financial assistance to adult children can be gratifying, it can also have negative consequences for both parent and child. Next month, I’ll discuss how you know if and when it’s time to cut the purse strings and how to make that transition.