To keep up with rising costs, many young adults turn to a likely safety net: their parents.
From buying groceries to paying for their cell phone plan or covering health and auto insurance, 45% of parents with a child age 18 or over provide them with at least some financial support, according to a recent report by Savings.com.
On average, these parents are spending more than $1,400 a month helping their adult children make ends meet, the report found.
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In the last year, inflation has posed a challenge for those trying to achieve financial independence. Soaring food and housing costs are just some of the significant hurdles for young adults just starting out.
For parents, however, supporting grown children can be a substantial drain at a time when their own financial security is at risk.
And parents nearing retirement contribute the most to their children — to the tune of about $2,100 a month, on average, while putting only $643 a month into their retirement accounts, Savings.com found.
Overall, America’s retirement preparedness has declined as the economy has faltered, Fidelity’s 2023 Retirement Savings Assessment also found. In 2020, 83% of savers had the income they would need to cover estimated expenses during retirement. Now, only 78% do.
With their retirement security in jeopardy, nearly half, or 48%, of retired Americans believe they’ll outlive their savings, according to a separate report by Clever Real Estate.
‘It has to go both ways’
“Everybody is everyone else’s lifeboat when it comes to hitting an iceberg,” said Laurence Kotlikoff, economics professor at Boston University and president of MaxiFi, which offers financial planning software.
However, “it has to go both ways,” Kotlikoff said. “Parents are providing a lot of support, and the kids have to realize that the quid pro quo here is that they’re going to be expected to take care of their parents.”
Having an open dialogue can help, he added. “Once that conversation gets going, it can continue for the next 40 years.”