Parents step in to help their adult children when they are in financial distress, but many sacrifice their own savings in the process.
More than two-thirds (68 percent) of parents of adult children have made or are making financial sacrifices to help their children financially, according to a new Bankrate survey. Parents say they have sacrificed retirement planning (43 percent), emergency preparedness (51 percent), paying off their own debt (49 percent) or reaching a financial milestone (55 percent).
Younger generations like Gen Z (18-26 years old) are graduating from college and starting their careers in a turbulent era of inflation and rising interest rates. Generation Z believe young adults should start paying bills later than older generations, but they may be postponing financial independence as a result. However, helping adult children too much in the short term can hurt a parent’s long-term retirement or savings plans.
Remember the saying about putting on your oxygen mask before helping others. Of course we want to be empathetic and help our children, but sometimes financial support goes too far. — Ted Rossman, Senior Industry Analyst Bankrate’s Key Findings on Financial Independence Many parents are deeply affected by helping their children over the age of 18 with money. 31% of parents of adult children have made what they consider a significant financial sacrifice to help their adult children with money. About half of parents have sacrificed their emergency savings for their children. 51% of parents of adult children have sacrificed their savings for emergencies to help them financially. More and more low-income households are sacrificing emergency savings. 58% of households with annual incomes of less than $50,000 have made financial sacrifices to help their adult children, compared to 46% of households with annual incomes of $100,000 or more. Parents sacrifice their financial stability to help their adult children
Almost one in three parents (31 percent) have made a significant financial sacrifice to help their adult children financially.
More than half (57 percent) of all US adults would not pay for a $1,000 emergency expense out of their savings, according to Bankrate data from January 2023. Now, just over half (51 percent) of parents of adult children say they sacrificed their emergency savings to help their children — 20 percent say it was a significant sacrifice.
Parents have also sacrificed paying off debt, saving for retirement, or some other financial milestone:
Source: Bankrate survey, Oct. 14-16 March 2023
Men are significantly more likely than women to feel that they sacrificed their debt-paying efforts (53 percent versus 46 percent) and other financial milestones (58 percent versus 52 percent) to help their adult children. However, men and women were even when it came to sacrificing retirement savings (43 percent each) and short on emergency savings (53 percent vs. 50 percent).
Although different regions of the US tend to differ financially, location played less of an impact on parental sacrifice, according to the US Census Bureau. The only exception was the Midwest, where far fewer parents feel they sacrificed for their adult children: Only 38 percent of parents of adult children in the Midwest feel they sacrificed their retirement savings for their children, compared to 46 percent of Southern parents, 45 percent of Northeast parents, and 39 percent of Western parents.
Parents may naturally want to help their kids when they’re in financial distress, but Ted Rossman, senior industry analyst at Bankrate, advises against making it a habit.
“[Paying your child’s bills]can enable bad behavior or stunt the development of an adult child,” Rossman said. “It can also jeopardize your own retirement and other financial goals. You can get credit for a lot of things, but retirement is not one of them.”
Low-income households are more likely to sacrifice emergency savings to help their adult children
In households with incomes under $50,000, 58 percent say they sacrificed their emergency savings for their children, compared to 46 percent of parents with household incomes of $100,000 or more.
These two income brackets are closer to other financial sacrifices they have made for their adult children:
Retirement Savings: 45% of parents with household incomes less than $50,000 per year compared to 41% of parents with household incomes of $100,000 per year or more. Paying off debt: 50% of parents with a household income of less than $50,000 a year compared to 49% of parents making $100,000 a year or more. Another financial milestone: 58% of parents with a household income of less than $50,000 per year compared to 53% of parents making $100,000 per year or more. Baby boomers expect financial independence earlier than Gen Z
Most adults will eventually need to start paying their own bills, but not everyone agrees on when that is. According to Bankrate, older generations believe that people should start paying their bills independently much earlier than younger generations.
Source: Bankrate survey, Oct. 14-16 March 2023
On average, American adults believe that people should start paying their own bills for their car payments, auto insurance, cell phone bills, subscription services, and credit card bills by age 20—the youngest median age for bill payments. They also believe that, on average, people should pay for both their own health insurance and student loans from the age of 23 — the oldest median age for bill payments.
Baby Boomers (ages 59-77) and Gen Zers have the biggest difference in ideal age: On average, Baby Boomers believe that adults should start paying various bills on their own about one to three years earlier than Gen Zers.
For example, while Gen Zers believe people should start paying for their cars at 22, Baby Boomers believe they should start paying for their cars at 20. Gen Zers and Baby Boomers are also at odds on auto insurance (22 years on average vs. 19 years on average) and cell phone bills (21 years on average vs. 19 years on average).
Men and women are similarly divided about when people should start paying their own bills. Men, on average, say people should start paying their own bills about six to 12 months younger than women. Men, in particular, believe that people should start paying for their student loans themselves at 23, while women say they are 24.
Additionally, Midwesterners generally believe that people the same age or younger than in most other US regions should pay for their own bills. For example, people in the Midwest think people should start paying for their auto insurance at 19, while people in the Northeast think people should start paying at 21.
3 tips to help your adult children become financially independent Agree on your budget with your partner. “If you’re looking to provide financial assistance to your adult children, make sure you and your spouse agree and have the numbers listed to ensure the assistance will work within your budget,” Rossman said. Consider how realistic it might be to help your children without resorting to retirement savings or other emergency funds. Adding your child’s bills to a family plan, often available with subscriptions or cell phone bills, can help them financially without making significant financial sacrifices. Set expectations with your children. If you want to help your children financially, Rossman recommends giving only a certain dollar amount or funds within a set time frame. “Be clear about the parameters [around financial assistance] even with your adult children,” Rossman said. “Help shouldn’t be seen as a blank check or open-ended handout.” Have the conversation sooner rather than later. Talking to your kids about financial independence before they stop paying their bills can help you and your kids avoid resentment. Tell your child if you plan to only pay their cell phone bill until they turn 21, so they have time to prepare to pay for themselves. Financial independence can bring the thrill of growing up and succeeding later in life – show your child what you’ve learned about finance in your own life and give them the space to learn the rest.
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Bankrate.com engaged YouGov Plc to conduct the survey. All figures are from YouGov Plc unless otherwise stated. The total sample size was 2,346 US adults, including 773 parents with children 18 and older. The field work was carried out from March 14 to 16, 2023. The survey was conducted online and meets strict quality standards. A non-probability based sample was used, using both odds up front during the survey and then a weighting scheme afterwards, designed and proven to produce nationally representative results.
