A new study from TD Ameritrade finds that 22% of Americans are giving financial support to an aging parent or an adult child, and sometimes to both. On average, the cost is $12,000 per year, and that's on top of all the other costs of running a household.
And it’s not a generational thing.
“Not only are Baby Boomers helping their children,” says Matthew Sadowsky, director of retirement at TD Ameritrade, but what is surprising he says is that “Millennials and Gen Xers are financially supporting their parents and in some cases their adult children as well to a much a greater degree than [before].”
So much for that "living in their parents' basement" narrative.
“Roughly 20% of Millennials that we surveyed are providing financial support to their parents,” Sadowsky says. “It’s not just the case that Millennials are sitting home after college and parents are ready to get rid of them.”
The study finds that financial support for adult children and aging parents is costing American household budgets $630 billion a year. “It’s a situation where some people are going to have to work longer than they had expected or wanted to or they are going to have to do some penny pinching…and maybe reallocate,” Sadowsky says.
Other highlights of the survey:
33% of respondents think they will not have as secure a financial life as their parents.
52% do not save or invest the same way their parents did.
83% say they would support an aging parent over an adult child.
69% of those who support their grown children say they will do so until they find “well-paying jobs.”
30% say they have “made small sacrifices and lived more frugally” to support their families.
So what can you do? Sadowsky says first and foremost, plan ahead. Allocate some part of your retirement plan to save for these costs assuming that you will have to support a family member. You could also set aside some money in a separate account. Sadowsky says if you don’t end up needing the money to support someone, you will have more money than you thought to put toward your retirement.
Hmm, the link to the study doesnt work. I'd be interested to know how many Gen Xers and Boomers support[ed] their parents financially, and how the numbers compare with the millennial numbers. And, what qualifies as financial support? Does having to pay rent to financially sound parents count, when they don't need the money but are charging the kids out of principle?
DH and I were just discussing this today. My mother had a series of super crappy events during the recession that I believe she will never recover from. We are planning now so we can support her when she is needing it.
Post by charminglife on Aug 5, 2015 8:28:43 GMT -5
Here's the press release from TD Ameritrade. What really stood out to me is that aging parents being supported by a child are twice as likely to be female. I think it's striking example of how the wage gap between men and women has a ripple effect.
RESS RELEASE DETAILS
Supporting Adult Kids, Aging Parents Costs American Family Budgets $630 Billion a Year
August 4, 2015 One Fifth of Americans Are Financial Supporters to One or More Family Members TD Ameritrade Survey Also Shows Inter-Generational Envy
OMAHA, Neb.--(BUSINESS WIRE)-- Although Americans surveyed say providing monetary support to a family member is not a financial struggle, many also maintain high debt levels and have delayed major life milestones to provide this financial assistance. TD Ameritrade’s 2015 Financial Support survey explores the struggle Americans feel towards helping a family member in need while still in debt themselves, and reveals key differences between Generation X and Baby Boomers.1
The Real Cost of Financial Support
One in five Americans (22 percent) provide financial support to a parent and/or an adult child (“Financial Supporters”). Over the past year, Financial Supporters have given $12,000 of support on average – that’s an estimated $630 billion from the US economy.2 Few report that providing this support is causing them great financial hardship: only 22 percent say they needed to use their savings to provide financial help while 30 percent made small sacrifices and lived more frugally. However, Financial Supporters hold almost $100,000 in debt on average: $22,000 in unpaid credit card balances, personal lines of credit, or personal or student loans, and $75,000 in mortgage debt. Generational Differences and Emotions Play a Role
Half of Generation X (49 percent) think they have more financial responsibilities than their parents’ generation and 39 percent feel their generation will never have as secure a financial life as their parents’ generation. Financial Supporters say they are glad to be able to help the family member they support (64 percent are very glad to help a parent and 53 percent report the same about a child) and would sacrifice more if needed, while a third (36 percent) would delay their retirement to financially support their adult children. But, if forced to choose, 83 percent of Financial Supporters would support an aging parent over an adult child. Financial supporters are almost twice as likely to be supporting a mother (42 percent) than a father (23 percent) and mothers receive $5,000 more support. Most (69 percent) Financial Supporters who support their adult children will do so until their children find well-paying jobs. Tough Conversations Can Lead to Financial Solutions
Conversations about financial support most often happen when the family member asks for help (44 percent discussing with parents, 52 percent discussing with children). The majority (79 percent) have not discussed financial support of others with a financial professional, and only half (49 percent) have discussed it with the person whom they support. The top conversation topics between Financial Supporters and whom they support are money management (54 percent) and reducing the need for support (50 percent). “The financial downside of living longer may mean not only planning for our own extended retirement years, but also caring for aging family members in ways that can take a solid bite out of any well-laid plans,” said Matthew Sadowsky, director of retirement at TD Ameritrade, Inc., a broker-dealer subsidiary of TD Ameritrade Holding Corporation. “And even beyond the financial implications, this could have an impact on family dynamics. With older generations it can be an especially difficult conversation to have. But, it’s better to have the discussion and do some detective work now – as well as some planning – than get hit with a daunting financial reality later.”
2: $630 billion loss estimated as follows: On average, a survey respondent who has financially supported either an adult child or aging parent in the past year has spent $12,000. One fifth (22 percent) of survey respondents (or 52,500,000 Financially Supportive Americans out of a possible 240 million U.S. adults3) spent this amount of money in the past year, translating to a National loss of $630 billion.
I don't truly support my mother but I am her efund. She currently works full time and makes a decent salary, she's just very bad with money. She always has been. She also gives every extra dime she has to my brother so I sometimes have resentment about helping her. As she gets older, I'm sure I'll have to pay for more stuff or send some sort of monthly allowance. I would do that now but we can't afford it. I think I'm barely a millennial (born in 82).
Hmm, the link to the study doesnt work. I'd be interested to know how many Gen Xers and Boomers support[ed] their parents financially, and how the numbers compare with the millennial numbers. And, what qualifies as financial support? Does having to pay rent to financially sound parents count, when they don't need the money but are charging the kids out of principle?
Yes, because I'd be really surprised if Gen X and perhaps even Boomers didn't support their parents at higher rates, and moreover, if any other generation received as much support (financial and housing) as millennials.
My parents (mom and step dad) were terrible with money and now that they are divorced my husband and I will probably end up supporting my mom. (It is all coming to a head now).
Prior to the divorce my step dad was self employed and his parents tended to bail them out a lot.
My dad and step mom support my stepsister a lot and my.various aunts and uncles. When my grandMA was alive, Dad was often paying for various expenses.
All this to say is that, by birth year I am a millenial, but have supported myself and will end up supporting my mom. Thankfully all the rest of the parents should be okay.
I never know how to respond to complaints about millennials in any objective fashion. I recognize that every generation experiences this, but it's really adding insult to injury when I have $100k+ student loan debt, will likely never own a house, live paycheck to paycheck despite having a Master's degree and working full time and part time jobs simultaneously, and every time I see someone else talk about my generation it's about how selfish / lazy / vain / entitled we are.
Of course millennials support their parents financially, and that amount of support will only increase as we all get older. My folks are only fifty, in the prime of their lives, and neither of them have a bit of retirement savings to their names. In fifteen years, I fully expect to have to support them as well as my (then) 20 year old son, probably alone (despite the fact that I have four siblings, as I am the oldest and most stable and the girl, and we know how this works). A lot of us have parents who are terrible with money, or who were affected by the recession just as much as we were.
When we buy a house next year, our plan is to make sure we have a finished basement that will be able to serve as a suite for my mom in case she loses my step-dad (not out of the realm of possibility in the near future). I don't know if she'll ever want to, but we both figure at some point one of our parents might need it.
To be honest, I wish there was something I could do to help support her now. She's living in poverty, but I'm not sure she'd accept my help.
I never know how to respond to complaints about millennials in any objective fashion. I recognize that every generation experiences this, but it's really adding insult to injury when I have $100k+ student loan debt, will likely never own a house, live paycheck to paycheck despite having a Master's degree and working full time and part time jobs simultaneously, and every time I see someone else talk about my generation it's about how selfish / lazy / vain / entitled we are.
Of course millennials support their parents financially, and that amount of support will only increase as we all get older. My folks are only fifty, in the prime of their lives, and neither of them have a bit of retirement savings to their names. In fifteen years, I fully expect to have to support them as well as my (then) 20 year old son, probably alone (despite the fact that I have four siblings, as I am the oldest and most stable and the girl, and we know how this works). A lot of us have parents who are terrible with money, or who were affected by the recession just as much as we were.
Yeah. My brother pretty much washed his hands of my mom so being the oldest and the girl, I feel like it is up to me. :/
My parents are in a good place (but my dad is still working at 75 and ideally plans to work until he dies). DH's parents I suspect are not, but we also really don't anticipate that FIL will live to a very old age. 70 would be surprising to me - he takes awful care of himself and has several chronic medical conditions. Worst case, we'll end up taking care of MIL. At least I like her.
Post by downtoearth on Aug 5, 2015 10:14:07 GMT -5
It wasn't that long ago, but at 34 I was barely making it with my bills, daycare costs, our mortgage, and our food costs. We didn't have a lot extra for retirement even. I can't imagine being financially responsible for my family and another couple adults at that age.
I also don't think millennials are bad, I've have several "typical" millenials as coworkers that are great at what they do. I feel bad that so many had no option but to take loans and go straight to grad school to keep busy, now the market is saturated with a lot of highly educated people with little to no experience. I know in our business that it seems that our hiring staff still prefers someone who has and undergrad, got some initial experience, and then went back to grad school with that experience under their belt. We pay SO much less for someone without experience and if you have a masters degree, it doesn't really boost your salary without that experience.
It wasn't that long ago, but at 34 I was barely making it with my bills, daycare costs, our mortgage, and our food costs. We didn't have a lot extra for retirement even. I can't imagine being financially responsible for my family and another couple adults at that age.
I also don't think millennials are bad, I've have several "typical" millenials as coworkers that are great at what they do. I feel bad that so many had no option but to take loans and go straight to grad school to keep busy, now the market is saturated with a lot of highly educated people with little to no experience. I know in our business that it seems that our hiring staff still prefers someone who has and undergrad, got some initial experience, and then went back to grad school with that experience under their belt. We pay SO much less for someone without experience and if you have a masters degree, it doesn't really boost your salary without that experience.
I graduated from college in 2008, and this is basically what me and all of my friends did after fruitlessly searching for jobs. At least I was lucky enough to land a paid assistantship so the only student loan debt I have is from my undergrad.
The parents of the Millenials are the first generation for whom pensions are pretty much non-existent, right? I wonder if that has something to do with it.
The parents of the Millenials are the first generation for whom pensions are pretty much non-existent, right? I wonder if that has something to do with it.
Not necessarily. My parents are boomers with pensions. And I was born in 1980 for context since it's debatable if I'm a millenial.
The parents of the Millenials are the first generation for whom pensions are pretty much non-existent, right? I wonder if that has something to do with it.
Not necessarily. My parents are boomers with pensions. And I was born in 1980 for context since it's debatable if I'm a millenial.
We're almost the same age and my dad has one, but it's not nearly as common for our parents as it was for their parents, right? And I'm guessing that the rate only decreased over time.
Not necessarily. My parents are boomers with pensions. And I was born in 1980 for context since it's debatable if I'm a millenial.
We're almost the same age and my dad has one, but it's not nearly as common for our parents as it was for their parents, right? And I'm guessing that the rate only decreased over time.
Yes totally true. And my parents didn't have me until their mid 30s. My mom turns 70 this year and my dad is 67.