Jill on Money

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Financial interdependence

When I field questions about parents helping their adult children financially, there is ambivalence from both sides.

The older generation often feels like they have no choice, but also are dismayed that despite their best efforts, their kids can’t swing it on their own.

Meanwhile many adult children feel shame that they can’t fully support themselves, but really do need the money. None of this is good for holiday meals, but if it’s any consolation, more families are experiencing financial interdependence.

A recent study from Pew Research found that 44 percent of young adults ages 18 to 34 who have a living parent say they received financial help from their parents in the past 12 months.

Not surprisingly, the results skew with age: More than two thirds who are younger than 25 receive help, while 30 percent among those ages 30 to 34 are still financially dependent on their parents.

The most common way to help is to have the kids live at home. One podcast listener told me that she could not downsize because her three 20-something year-olds were still living under her roof.

Pew notes that today’s young adults are more likely to return to their parents’ nests than young adults in the early 1990s (when their parents were around the same age), despite earning more than the earlier generation on an inflation adjusted basis.

The higher wages are likely due to the fact that today’s young adults have attended college in greater numbers than their counterparts 30 years ago, which boosts income. However, that also means that many of these grads have the added pressure of outstanding student loans that weigh them down.

In addition to providing a roof over their head, the areas where parents are helping include household expenses (28 percent), cell phone bill or subscriptions to streaming services (25 percent), rent or mortgage (17 percent), medical expenses (15 percent), and education (11 percent).

The younger the adult child, the more help they receive. (While Pew did not ask about money for weddings, as I prepare for six (yes, SIX!) nuptials this year, I cannot believe the amount of money being doled out by parents of all types on these affairs. According to The Knot, the national average cost of a wedding is $30,000, with parents chipping in for half of the wedding budget.)

In an interesting twist, Pew asked the same question to both parents and their children. “For the most part, (the parents’) answers match those of the young adults surveyed.”

Unfortunately, by helping their kids, some are putting their own financial stability at risk.

“Among parents who say they helped their children financially in the past year, 36 percent say doing so has hurt their personal financial situation at least some,” with lower income earners bearing more of the brunt.

When I tell parents to be careful about the support, I remind them that helping their kids today may mean that the tables could turn, and these same parents could need financial assistance from their kids in the future.

As Pew notes, “While it is more common for young adult children to receive financial help from their parents than it is for them to give help, 33 percent say they helped their parents financially in the past year…among parents who received financial help from their children, 38 percent say the help was for special circumstances, 31 percent say it was for recurring expenses and 30 percent say it was for both.”

Financial interdependence is not going away, which means that an honest appraisal of each family’s situation must consider a plan that can address the short term needs of the younger generation and long-term needs of their parents.

(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com) ©2024 Tribune Content Agency, LLC