Parenting Is A Lifetime Commitment
According to a new report, The Financial Journey of Modern Parenting: Joy, Complexity and Sacrifice, many parents see their children’s adult years as the most expensive stage of parenting. This may sound shocking when you think about the childhood years of babysitters, braces, dance lessons and sports that contribute to the average cost of raising a child to age 18 at more than $230,000.
Collectively parents contribute about $500 billion for financial support of their adult children. And it’s not just the wealthy parents. With about 79% of parents reporting they contribute financially to their adult children, it covers all economic groups.
Shockingly, this $500 billion is twice the amount parents are saving for retirement. Parents put their adult children’s interests ahead of their own need to save for retirement and sacrifice their own financial security for their children.
What are parents willing to do to help their children financially? They pull money from their savings account, take on debt, take money from their retirement funds, delay their retirement and even come out of retirement to help their adult children. Many parents aren't aware of how much they're spending on their adult children and the long-term impact on their own finances.
What are parents paying for? Of the $500 billion total parents are spending on adult children, college education is about 25%, groceries and food cost a little over 10%, and cell phone service is about 4%. Many parents cover the full cost of these expenses, and it’s not just a few dollars each month.
Other items parents often pay for their adult children, not included in the $500 billion, are weddings and helping pay for first homes. According to the report, 31% of young adults live with their parents.
This financial support for adult children will most likely have unintended long-term future consequences. The most significant consequence is these same parents in their later years will be financially dependent on these children! How will they handle this when they won’t be able to continue their own lifestyle?
If you or your family identify with these statistics, evaluate your own preparation for your financial independence during retirement. Make sure you can take care of yourself throughout your life before you take on financial responsibilities of your adult children. If you are not certain about your future financial viability, please consult with a financial planner, your accountant or another trusted advisor.
Almost 50% of respondents regret not creating clearer boundaries with their kids about the financial support they are willing to provide. It’s never too late to begin that conversation.
-Sandra Cleveland