Sixty-eight percent of parents of children 18 or older have made a financial sacrifice to help their adult children with money, with 43% dipping into or cutting back on their retirement savings, a Bankrate survey finds.
Other financial goals parents have forfeited include: tapping their emergency savings (51%), paying down their own debt (49%) or achieving a financial milestone (55%).
$7T Retirement Savings Shortfall
Cutting back on or dipping into retirement savings is no small matter, according to Bankrate, which estimates that the market turmoil since 2021 has created a $7 trillion retirement savings shortfall.
“Remember that saying about putting your oxygen mask on before helping others?” says Bankrate Senior Analyst Ted Rossman. “Young adults are wrestling with student loans and high household formation costs, but if parents overextend themselves in an effort to help, they might end up jeopardizing their own financial security.”
Rossman believes that parents’ good intentions can not only hurt their own personal finances but instill bad money habits in their children:
Paying for your child’s bills “can enable bad behavior or stunt an adult child’s development. It can also put your own retirement and other financial goals at risk. You can get loans for a lot of things—but retirement isn’t one of them.”
Stunted Financial Growth
While older and younger people agree that age 20 is about the right time for a person to assume responsibility for their cellphone bills, credit card and car insurance, they agree that it’s OK for parents to help with more expensive items.
This mindset has been further ingrained because of inflation. Housing costs and health insurance, certainly, have risen dramatically in the past two years, while rising interest rates have made student loans costlier.
Parents also are even more inclined than the generation that came ahead of them to think their children will be financially worse off than them.
But if you ask a Gen Zer, those between the ages of 11 and 26, if they think their parents should help them out a while longer, they are more likely to think they should get help on cellphones, credit cards, car insurance and other incidentals until they are 22.
“While we want to be empathetic and help our kids, sometimes financial assistance goes too far,” Rossman says. “It might help to attach a specific dollar amount or timeframe.”
It does not help a parent to make their children think that they will always be there with a “blank check or an indefinite handout,” Rossman says.
3 Tips to Help Kids Become Financially Independent
1.) Set Goals With Your Spouse
Rossman says it helps a parent check their leniency and safeguard their family’s budget if they consult with their spouse or partner on how much they should dole out to an adult child.
One compromise might be to take out a family payment plan for certain expenses, like video streaming, cellphones or insurance, Bankrate suggests.
2.) Set Expectations With Your Children
If you want to help out your children financially, give them a dollar amount and a set timeframe for the assistance, Rossman suggests.
Parameters help, as does explaining in specific terms to a child how your own bills, health insurance coverage or basic retirement needs might be compromised. Chances are, they will be empathetic to a parent’s, especially a retired parent on a fixed income, needs.
3.) Have the Conversation Sooner Than Later
Parents who want to help or who enjoy helping their adult children with their bills can easily lose sight of how old their child has become while they are still supporting them.
Failure to have such a conversation could easily instill resentment in a child when the time finally comes to pull the financial plug. Should you still be paying your 30-year-old child's cellphone bill or allowing them to live rent free in your house?
Giving a child a deadline for taking care of their own monetary responsibilities gives them time to both mentally and financially prepare.
“Financial independence can bring the thrill of adulthood and can set them up for success later in life,” Bankrate sates. “Show your child what you’ve learned in your own life about finances and give them the space to learn the rest.”
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