Before a commercial flight leaves the ground, flight attendants instruct passengers to "Put on your own oxygen mask first before attempting to help others around you." The rationale is that if you become impaired, you won't be able to help anyone else.
The same reasoning can be applied to helping adult children financially.
As noted in our recent post, "Should You Help Your Adult Children Financially?," the Baby Boomer generation currently holds around $78 trillion in assets. However, this wealth is distributed unevenly. For the total U.S. population, the Federal Reserve reports in Q1 2023 that the top 50% of households have 94% of total assets compared to only 6% for the bottom half.
This inequality holds for the Boomers as well. In fact, 42% of Boomers do not have any retirement savings. Among those who do, the median amount was $134,000, a nest egg many experts predict won't last long enough in retirement.
This means many Boomers will depend on Social Security for the long haul. Yet, since the average monthly Social Security check is only about $1,800, some retired Boomers will have difficulty keeping up with their living expenses.
Overall, for Boomers on the lower half of the scale, helping adult children financially might not be feasible.
On the other hand, many Boomer parents are helping their adult children financially. A survey by Savings.com showed that 45% are supporting at least one of their grown-up kids this way. Of these, the average monthly amount is over $1,400. Parents with ten or fewer years left until retirement were the most generous. On average, they paid $2,100 monthly while putting only $643 into their own retirement accounts.
The largest expense categories were housing (rent/mortgage), cell phones, and groceries. Some parents in the survey (21%) said they were helping with student loan payments, with the average monthly amount being around $245.
Yet with this giving comes risk to one's financial standing. A 2023 Credit Karma survey found that 81% of parents who financially supported at least one adult child reported it negatively affecting their finances. Examples were:
Impedes on lifestyle | 50% |
Forces cutbacks on living expenses | 49% |
Restricts retirement savings | 41% |
Work longer/prolong retirement date | 30% |
Take on debt | 25% |
Also, as noted in "Should You Help Your Adult Children Financially?", healthcare and long-term care costs can be significant in later years. Baby Boomers currently range in age from 60 to 77, and according to LongTermCare.gov, of those reaching age 65 today, about 70% will require some long-term care before they die. Of these, 20% will need it for longer than five years. Therefore, overly generous financial outlays to adult children today could limit options for affording essential care costs in the future.
Here are ten ideas to think about when considering financial support for an adult child:
*Our next post in this series, Helping Adult Children: Promote Financial Literacy and Avoid Dependency, discusses in more detail the many benefits these professionals can bring in fostering financial independence.
Post-Boomer generations need help equaling the widespread affluence of the post-WWII cohort. Many Boomers, therefore, are inclined to devote some of their wealth to helping their adult children. In doing so, they need to be savvy about how much help to give and how to deliver it so they don't overtax their resources and prevent a sense of entitlement among their beneficiaries.
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