A new report from consumer-financial-services company Bankrate argues that parents should be wary of putting too much financial support into their children.
- Baby boomers believe young people should pay their own bills between the ages of 19 and 22, while millennials say between 20 to 24.
- This includes car insurance, healthcare costs, credit-card bills, student loans, and cell-phone bills.
- 68% of parents have made a financial sacrifice to help their children, and 31% say the decision had a critical impact on their finances—up to and including burning through savings or emergency funds.
- Bankrate argues that this trend comes at the expense of new opportunities in the market, with some savings accounts paying as much as 4% interest at the moment.
Why It’s Important
Not every family situation is the same. Many families have spare money to help assist their children financially through tough times and challenges. Other families do not, and attempting to support their children comes at the expense of savings. As inflation continues to rise at 5%, recession looms, and the job market grows tighter, wallets are getting tighter.
Launching Financial Grownups author Bobbi Rebell tells Bankrate that the best solution to addressing financial problems with young adults starts with kindness and honest communication, learning about what is causing the financial hardship they are experiencing and seeing if there are solutions that are possible without dipping into emergency savings. Start with asking them how they got there and eventually get to what ideas they have—other than your emergency savings—to move forward.”
Not every financial crisis is a result of poor decision-making, and parents ought to avoid being judgemental of poor habits. Many problems, like layoffs, are out of the direct control of young people. Young adults are eventually responsible for their own financial well-being, and paying the bills and avoiding dependency help all parties involved.
“While I believe it’s our responsibility as parents to provide for our children, over time, the responsibility shifts to the child becoming self-sufficient and less dependent on the bank of mom and dad. By continuing to enable [them], adult children make poor financial decisions and develop bad financial habits. When parents bail them out over time, it hurts both [parties] in the long run,” says Sentinel Financial Planning CFP Mark Humphries.