With the cost of living rising, many adults are turning to a familiar safety net: mom and dad.
Nearly a third of millennials and Gen Zers, over the age of 18, get financial support from their parents, according to a new survey by personal finance website Credit Karma. The site surveyed more than 1,000 adults in October.
More than half of parents with adult children said their children lived with them. Another 48% said they pay for their kids’ cell phone plan, car payments, or other monthly bills. The report found that nearly a quarter also said they give their adult children a regular allowance, pay some or all of their rent or make them an authorized user on their credit card.
“What used to be paying your child’s cell phone bill every few months has now morphed into a more comprehensive expense set for many parents,” said Courtney Aleph, consumer financial advocate with Credit Karma.
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During the pandemic, the number of adults who moved back in with their parents—often referred to as “Boomerang Babies”—temporarily rose to a historic high.
Most said they initially moved in with their parents out of necessity or to save money. Huge student loan bills from college and skyrocketing housing costs put financial strains on those just starting out. The high cost of living and high rents make it difficult to move forward.
The number of households with two or more generations of adults has quadrupled in the past five decades, according to a separate report from the Pew Research Center based on census data from 1971 to 2021.
Pew has found that finances are the number one reason for multiplying families, in part because of ballooning student debt and housing costs.
Now, 25% of young adults live in a multigenerational household, up from just 9% five decades ago.
In most cases, children between the ages of 25 and 34 live in the home of one or both of their parents. A smaller part lives in their own home and an older parent or relative resides with them.
Not surprisingly, older parents are also more likely to pay most of the expenses when two or more generations share a home. Pew found that a 25- to 34-year-old in a multigenerational household contributes 22% of total household income.
How to achieve financial freedom
However, for parents, supporting adult children can be a huge drain at a time when their financial security is at risk.
In an economy that has produced the highest rate of inflation since the early 1980s, the cost of providing support has risen sharply. According to Credit Karma, 69% of parents who help their adult children say it causes them financial stress.
“It is imperative that parents do what they can to take care of themselves financially first, before providing financial support to their adult children,” Alif said.
“Like anything, budget your income and expenses, taking into account savings, debt repayments and, if possible, contributions to a pension fund,” she advises.
“Once that work is done, figure out how much is left to help your adult children hands-on and set that expectation with them. You might even consider setting an expiration date to give your adult children a schedule for when they need to be back on their feet.”
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