Parents use retirement savings to help grown children financially

Parents use retirement savings to help grown children financially

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Three-fifths of parents with adult children gave them financial help in the past year, Pew Research reports in a new study.

The finding illustrates — if we ever needed a reminder — that modern parenting doesn’t end when a child turns 18. But supporting a grown child can be expensive, financial planners say. And parents need to make sure their own financial needs are met.

Nearly half of adults under 30 live with their parents, Pew research shows. That number has increased significantly over the years.

Americans are marrying later, and waiting longer to have children. Researchers say these trends point to a new stage of life, hidden between adolescence and adulthood. Some call it “emerging adulthood.”

‘Snowplow’ parents clear a financial path for grown children

Young adults face many economic challenges in 2024 America. The cost of college and student debt are on the rise. House prices have increased. Mercurial inflation and interest rates have depressed consumers.

Parents, for their part, seem more inclined to continue parenting past the age when a child exits childhood, removing all obstacles in their way. Some researchers call this “snowplow” parenting.

“Let’s move everything out of the way, so that our children can walk fully on the street,” said Jonathan Abramowitz, a professor of psychology at the University of North Carolina.

It’s easier than ever to pay an adult child’s bills, whether the child lives with you or not. Earlier generations usually paid their bills by mail. Today, everything is in apps or online.

Pew reports that 28% of adults ages 18 to 34 received financial assistance with household expenses, such as groceries or utilities, in the past year; 25% received parental assistance with a cellphone bill or streaming subscription; 17% with rent or mortgage; 15% with medical expenses; and 11% with educational expenses.

Less than half of adult children report financial independence

Less than half of young adults claim complete financial independence from their parents, Pew reports. Even past 30, one-third of adult children rely on their parents to pay at least some of the bills.

The Pew study, published on January 25, took a survey of 4,512 adult children and parents.

Generally, parental assistance to older children is relatively small.

John Maxwell, a lawyer in St. Louis, father of three 30-year-old daughters.

When they finished school, he told them, matter of factly, “You’re the only one, kid.” They got jobs, moved out, and learned to pay their way.

But not completely. Maxwell’s parents still pay for a family cell phone plan and some streaming services. Every year, parents cover the airfare or hotel fees for the family vacation.

The father loaned his eldest daughter when she was just starting out. “But it’s a debt, not a gift,” he said.

And that’s where the Maxwells draw the line.

“It’s a tough world out there,” John Maxwell said. “You have to learn to stand on your own two feet.”

For older parents, helping grown children is ‘Parenting 101’

For many older parents, supporting an adult child seems to be the most important thing in parenting.

“We will go to the ends of the earth to make sure our children are safe and happy,” said Christopher Lyman, a certified financial planner in Newtown, Pennsylvania, who advises couples with adult children.

Parents who support adult children have seen their offspring emerge into a different world than the one they knew as a teenager, said Teresa Bailey, a certified financial planner in Nashville.

“They feel that the economy is different now, and the world is different, and it’s harder for someone to be completely financially independent,” he said.

Parental help is good, he said, as long as the parents can afford it. Some elderly parents continue to support adult children at the risk of their own retirement.

“That’s the first thing we check,” he said. “Are you spending on your kids and putting yourself in a situation where they have to spend on you, because you don’t have enough savings for retirement?”

Bailey projects the couple’s budget into their 90s, showing them where their finances are, based on their saving and spending patterns.

For couples who spend a lot on adult children, he said, the exercise can provide “a light bulb experience.”

Many parents who support grown children are hurting their own finances

In a new Pew study, more than one-third of parents who provide financial assistance to adult children said doing so hurts their own finances.

“Often, the one giving the support is not the one who can afford to give the support,” Lyman said.

For adult children receiving parental help, the help can come as a blessing or a curse.

In some circumstances, parental help can be a godsend: A recent graduate struggling with student loans, or a first-time home buyer who can’t afford the down payment.

However, experts say, the aid must eventually end.

“It has one downside,” said Abramowitz, “and that is, it reinforces the need for trust. Young adults, they get hit, because parents protect them, and children never learn how to launch.

Parents who support adult children “have the best intentions at heart,” Abramowitz said.

However, each one, he said, should ask themselves this question: “When does this interfere with the child’s ability to continue their life?”

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