Many parents struggle to accept the fact that their grown kids no longer need them. But the majority of parents seem to have the opposite problem -- their adult children need them a little too much, especially when it comes to financial support. And while it's one thing to pick up the occasional dinner tab or treat your grown kids to a new household gift here and there, it's another to offer ongoing financial support. Yet 75% of parents with adult children are doing just that.
In a poll , three-quarters of U.S. parents with grown kids admit to helping their children cover their bills. What many don't realize, though, is just how much their generosity might end up costing them.
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When you can't seem to cut the cord
It'd be one thing if parents were mostly helping their adult kids with financial emergencies -- things like household and vehicle repairs that one can't exactly plan for. However, the reality is that parents who help support their grown children overwhelmingly chip in for predictable expenses. Here's a more detailed breakdown of the things parents today are paying for:
You can't help but notice that many of the above expenses are extremely run-of-the-mill. In an age when cellphones are no longer a luxury but a virtual necessity, you'd think more adults would manage to budget for them. But, apparently, a large chunk of grown-ups rely on their parents to remain reachable on the go. The same holds true for transportation, rent, and utilities -- things that adults should expect to have to pay for. The fact that so many depend on their parents to cover these costs paints a sad (and, frankly, lazy) picture.
Why parents feel compelled to help out
So why don't more parents insist that their adult kids pay their own way through life? Part of it boils down to that nurturing instinct that doesn't automatically disappear once one's children reach a certain age. Part of it also boils down to guilt.
It's not a secret that young adults today are worse off financially than their parents were at the same age. In fact, a study earlier this year revealed that younger workers earn $10,000 less, on average, than workers the same age did back in 1989. Furthermore, younger workers today have a cumulative net worth that's estimated at just half of what baby boomers (meaning, their parents) managed to acquire in their 20s and 30s -- a fact that countless parents obviously feel a need to compensate for.
And let's not forget that more young adults today have high levels of student debt than in years past -- debt that obviously impacts their cash flow and limits their ability to meet certain financial goals. Still, that doesn't justify the practice of parents heavily subsidizing their adult children's lifestyles, so if you've fallen into that habit, it's time to change your ways, before your own finances suffer.
The danger of supporting adult children
If you're a wealthy 40-, 50-, or 60-something with plenty of money set aside for retirement, then by all means continue throwing some cash your children's way. But most parents with adult kids aren't in that position. Quite the contrary -- most older workers are glaringly behind on building their nest eggs. The median savings balance among households nearing retirement is a mere $17,000 -- hardly enough to live off for what could be a 20-year retirement or more. If your savings aren't great, then you should realize that every dollar you give to your children is a dollar you won't have when you need it.
And it's not just the money itself you're losing out on; it's also the growth that money might achieve. Let's say you currently give your adults kids $500 a month toward their living expenses and do so for a decade. If you were to put that money into an IRA or 401(k) instead and invest it at an average annual 6% return, you'd be sitting on an extra $79,000 in retirement income after 10 years.
Remember, your adult kids have the bulk of their careers ahead of them to earn money and improve their financial picture, whereas you might have a mere decade or less to pad your savings in time for retirement. So rather than continue to fund their existence, it's time to be a little selfish and focus on your own needs. The more your grown kids come to regard you as a financial safety net of sorts, the less responsible they'll be in managing their own money. You'll be doing both yourself and your children a favor by putting an end to what's clearly an unhealthy pattern for everyone involved.
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