As noted in our recent post, Should You Help Your Adult Children Financially?, the children of the Boomer generation have faced a different financial landscape as compared to their parents.
The situation is not confined to the United States. For example, Chinese workers between 16 and 24 are experiencing a 21.3% unemployment rate, spurring a trend of some parents paying their adult children the equivalent of a full-time salary to live at home and help around the house. Some call it being paid to be a kid.
While no similar trend has been reported in the U.S., post-Boomer generations struggle with specific impediments in their quest for financial independence.
Housing costs have prevented young adults from progressing financially. A 2021 CNBC analysis showed that between 1965 and 2020, home prices exploded by 118% compared to a mere 15% increase in household income during the same period after adjusting for inflation.
This has resulted in Millennials (adults aged 28-44) lagging the Boomer and Gen X generations in home ownership by age 30, according to Apartment List's 2023 Millennial Homeownership Report.
|
Generation |
Homeownership by Age 30 |
|
Millennials (1979-1995) |
42% |
|
Gen X (1964-1978) |
48% |
|
Baby Boomers (1946-1963) |
51% |
|
Silent Generation (1925-1945) |
60% |
Another way to look at this is that, in 1981, the average home buyer was between 25-34. Today, the average homebuyer is 44.
Further analysis in the report also showed that Millennials who still rent have become increasingly pessimistic about ever becoming homeowners in recent years. In 2018, 13% said they expected to be renters forever. By 2022, this jumped to nearly 25%. Although the pandemic was partly responsible for the sharp increase, the overall rise in the cost of buying a home is likely the main driver of this trend.
Those who rent are not immune from rising costs. Average monthly rents have increased 8.85% per year since 1980, while inflation over the same was 3.09% on average.
For those adult children who buy a home, parents frequently help financially, usually by contributing via gift or loan for a downpayment. Of homebuyers between the ages of 24-32, 22% depended on help from a friend or family member. Also, in the same age group who saved up for a downpayment, student loans, and credit card debt were major factors in extending the time needed to accumulate the money by a median of three years.
According to data from the National Center for Education Statistics (NCES), average undergraduate college tuition cost more than tripled from 1963 ($4,336 in 2020 dollars) to 2020 ($13,777). When federally guaranteed student loans debuted in 1965, many Boomers with college degrees often could cover higher education costs through employment earnings, help from their families, scholarships, etc. Their children were not so fortunate since these money sources were not enough to keep up with runaway tuition inflation.
As a result, student loan indebtedness has ballooned to $1.78 trillion with an average monthly payment of $503, which the typical borrower will pay for 20 years.
This has had a profound impact on the financial stability and wealth-building ability of student loan borrowers, who generally range from 20 to 40 years. As author Anya Kamenetz (Generation Debt, 2006) states, these borrowers are "waiting longer to get married and have children, making people less likely to own a home, start a business or leave their hometowns."
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America's love affair with credit cards and other forms of debt has grown to record levels across all generations. For example, the Federal Reserve reported that credit card debt is nearly a trillion dollars ($988 billion) as of June 2023.
It's not just credit cards. Averages for the other major non-mortgage debt types show that households of all ages carry a significant amount of debt.
| Debt type (balances) | Gen Z | Millennials | Gen X | Boomers |
| Auto | $9,894 | $14,836 | $16,836 | $10,611 |
| Credit card | $2,789 | $6,408 | $8,917 | $7,564 |
| Student loan | $7,067 | $15,014 | $12,680 | $5,083 |
| Personal loan | $1,915 | $5,299 | $7,348 | $5,050 |
| Total | $21,665 | $41,557 | $45,781 | $28,308 |
Source: LendingTree analysis of more than 150,000 anonymized credit reports on the LendingTree platform.
Not surprisingly, Gen X and Millennials carry the biggest load. They are the ones most likely to be simultaneously saddled with both looming college costs and caring for aging parents. Members of Gen Z, on the other hand, are early in their financial journey, so they have had less time to experience the financial burdens faced by their older siblings.
In any case, paying off debt restricts opportunities to amass wealth. As noted above, Boomers have paid off more of their debt load, so they potentially have more financial flexibility to help their adult children with their debts.
Adult children with children of their own shoulder a significant cost burden. According to 2020 figures from the Economic Policy Institute, U.S. households with children spend between 19% to 29% of their income on child care. The actual amounts vary based on location, number of children, and type of care.
Young workers depend on stable employment as one of the top ways to build wealth. Yet, a 2022 study by the bipartisan Council for a Strong America found that problems resulting from expensive and difficult-to-find childcare resources were hurting young working parents at their jobs. These parents were experiencing:
| Been late for work | 64% |
| Left work early | 64% |
| Missed a full day of work | 58% |
| Been distracted to the point of being less productive | 53% |
| Missed part of the middle of work shift | 44% |
| Reduced your regular work hours | 44% |
| Turned down a new job offer | 41% |
| Had your pay or hours reduced | 37% |
| Turned down further education/training | 36% |
| Had problems participating in work-related education/training | 33% |
| Changed from full-time to part-time work | 33% |
| Been reprimanded by a supervisor | 30% |
| Turned down a promotion/ reassignment | 28% |
| Quit a job | 26% |
| Been let go or fired | 23% |
| Been demoted or transferred to a less desirable position | 17% |
With income failing to keep pace with rising costs, it's no wonder post-Boomer generations are struggling to achieve financial independence. This pressure also negatively impacts retirement savings. The Goldman Sachs Retirement Survey & Insights Report 2022 showed that post-Boomer generations perceive significantly more impediments to retirement savings.
| Impacted Savings Ability | Boomers (1946-1963) |
Gen X (1964-1978) |
Millennials (1979-1995) |
Gen Z (1996-2012) |
| Too many monthly expenses | 56% | 72% | 84% | 82% |
| Caring for or financially supporting family members | 38% | 63% | 79% | 75% |
| Paying down existing loans, including student loans | 36% | 59% | 76% | 75% |
| Time out of the workforce for child or elder care | 31% | 55% | 72% | 75% |
| Credit card debt | 40% | 55% | 71% | 58% |
| Saving for college | 14% | 43% | 67% | 63% |
| Other financial hardships | 51% | 67% | 76% | 79% |
One piece of good news is that many members of the post-Boomer generations are saving for retirement. Also, of those saving, the younger they are, the sooner they started. However, given the median amount saved so far, many members of all three generations have a long way to go before they accumulate meaningful savings to achieve a comfortable retirement. Sadly, about one in ten of each generation have $0 in retirement savings.
| Generation | Age Started Saving* (Median) |
Estimated Median (including $0) |
No Retirement Savings |
| Gen X (1964-1978) | 30 | $82K | 11% |
| Millennials (1979-1995) | 25 | $49K | 10% |
| Gen Z (1996-2012) | 19 | $29K | 9% |
The financial obstacles faced by the post-Boomer generations are significant. Boomer parents who are lucky enough to have some free financial resources to help their adult children would be addressing some real needs. However, it's important to make an objective assessment of your resources before you throw out a lifeline. In an upcoming post, we'll explore some ideas to ensure you preserve your own financial health as you consider helping your adult children.
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