April 14, 2024
Your adult children ‘may not want the gravy train to stop,’ but don’t let them ruin your retirement

Your adult children ‘may not want the gravy train to stop,’ but don’t let them ruin your retirement

Helping your adult children with money is a balancing act. You can’t overdo it or you can sacrifice your own retirement savings or financial goals.

Amid the current economic uncertainty, 68% of parents with children 18 years or older have made a financial sacrifice to help them, according to a new Bankrate report. Further, nearly a third of that group (31%) identified that they have sacrificed “significantly,” while 37% said they have only sacrificed “somewhat.”

The dollar amount of “significantly” wasn’t defined. It was a self-reported analysis of what felt significant to the survey respondents. 

Overall, about half of parents of adult children say they have sacrificed their emergency savings (51% total; 20% significantly) and debt payoff (49% total; 18% significantly) to help their kids financially, while 43% say supporting their adult children has been detrimental to their retirement savings (18% significantly). More than half of parents (55%) have also sacrificed reaching some other financial milestone (16% significantly).

“It’s nice to help, but assistance can go too far,” said Ted Rossman, Bankrate senior industry analyst. “Remember that saying about putting your oxygen mask on before helping others? If assistance hurts your own finances, such as depleting your emergency savings or your retirement or your ability to pay off debt, that’s too much.”

Interestingly, views on helping differed by generation.

Generation X parents (ages 43-58) are more likely than baby boomer parents (ages 59-77) across all categories to have made a financial sacrifice to help their adult children: emergency savings (58% of Gen X vs. 47% of baby boomer parents), paying down debt (55% vs. 44% respectively), retirement savings (50% vs. 38% respectively), and reaching some other financial milestone (60% vs. 50% respectively). In all, 36% of Gen X parents also said they made a significant sacrifice.

“If that sets back your own finances and depletes your own retirement—you can’t get a loan for retirement—it can cause circular problems. The parents might end up asking the kids later for money as they age,” Rossman said. “I get that desire to help your kids, but help to a point. Don’t damage your own finances.”

Meanwhile, men are significantly more likely than women to feel they sacrificed their debt payoff efforts (53% vs. 46%) and some other financial milestone (58% vs. 52%) to help their adult children, but were tied when it came to sacrificing retirement savings (43% each) and close on emergency savings (53% vs. 50%).

Further, lower-income households (earning under $50,000 annually) are more likely to have made financial sacrifices than higher-earning households. The most notable spread is for those sacrificing emergency savings, where 58% of the lowest earning households have done so for their adult children, compared with 46% of the highest-earning households (earning $100,000+ annually). 

As far as what age constitutes a shift for people to start paying their own way, ages 20 to 23 is the consensus range for covering expenses from cellphone and credit card bills to car insurance and health insurance. 

While Generation Z, in particular, seem to think of age 21 as a benchmark for covering most costs, older generations are more likely to say that many parent-funded expenses should be finished mostly before that age.

“People may not want the gravy train to stop. But it’s also about the significant financial pressures on young people—student loan debt, housing costs have gone up, health insurance has gone up and wage growth has not kept pace,” Rossman said.

“While we of course want to be empathetic and help our kids, sometimes financial assistance goes too far. Make sure the assistance works within your budget and be clear about the parameters. Helping out shouldn’t be seen as a blank check or an indefinite handout. It might help to attach a specific dollar amount or time frame,” Rossman said.

April is National Financial Literacy Month. To mark the occasion, MarketWatch will publish a series of “Financial Fitness” articles to help readers improve their fiscal health, and offer advice on how to save, invest and spend their money wisely. Read more here.


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