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Supporting Adult Children and Financial Milestones

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Every parent wants the best for their children. Whether it’s happiness, health, or financial security, parents and guardians strive to provide their offspring with abundant opportunities. However, in today’s challenging economic landscape characterized by skyrocketing rent prices, inflation, student debt, and an uncertain job market, parents of Generation Z (Gen Z) and Millennials are increasingly finding themselves financially supporting their adult children for longer durations.

According to a recent survey conducted by Bankrate, a staggering 68% of parents have supported or are currently supporting their adult children. As a consequence, parents are facing delayed financial milestones, postponed retirement plans, extended debt repayment periods, and even the depletion of emergency savings. Interestingly, Gen Z and Millennials hold the belief that they should not start bearing financial responsibilities until specific ages.

The survey revealed that Millennials believe they should begin contributing financially at the age of 20, covering expenses like cell phone bills on family plans and subscription services. By the age of 21, they feel they should be responsible for paying for their own cars, and by 22, they should be capable of covering their own rent. Gen Z, on the other hand, prefers to achieve financial independence at even later ages, expressing that they should not have to pay rent until they turn 23, and travel costs should not be their responsibility until they reach 21.

Contrarily, their parents, primarily belonging to the Gen X and Baby Boomer generations, hold different views. They believe that financial obligations should commence as early as 19.

One parent, Mark Lacy, a 65-year-old from Seattle, experienced the detrimental impact of financially supporting his two sons since their high school graduation. Lacy estimates that his assistance has resulted in a significant $400,000 shortfall in his retirement funds. He contends that his generation has mistakenly embraced a sense of obligation to continuously support their children, shielding them from the realities of adulthood. Lacy argues that this behavior weakens both the culture and the economy by neglecting to encourage adult children to take on their own responsibilities.

Lacy’s sentiments are shared by many others. A research study conducted by Age Wave and The Harris Poll, involving over 7,000 retirees, found that 59% of pre-retirees expressed a desire for clearer boundaries regarding financial generosity with family members or close friends. Additionally, 63% of retirees wished to limit the extent of financial support they provide to adult children or relatives, while 55% aimed to reduce the amount of inheritance they leave to their heirs.

Lacy suggests that peer pressure may play a role in this phenomenon. Parents observe the actions of their friends and peers in supporting their children, feeling compelled to do the same. Sometimes parents give in to maintain harmony, writing a check and moving on without fully considering the long-term consequences.

However, Lacy emphasizes that it ultimately falls upon the parents to establish boundaries. They need to develop the backbone to prioritize their own financial well-being and engage in open communication with their spouse and children. Lacy advises parents to sit down with a calculator and a calendar, carefully evaluating the financial implications of their decisions. While he acknowledges the clarity gained through hindsight, he urges other parents to remain steadfast in their choices, recognizing that they have limited time to replenish the funds provided to their children.

Another parent, Tonya McKenzie, shares a similar journey. McKenzie and her husband initially planned to cease supporting their children after they turned 18. However, when their eldest son received a basketball scholarship to attend Sarah Lawrence College in New York, they realized they had no alternative but to provide financial assistance. McKenzie’s own experience echoes Lacy’s, as she received no support from her parents. Although the couple’s retirement plans remained intact due to their $30,000 annual contributions towards their son’s expenses, their lifelong savings were significantly impacted.

With three younger children still under the age of 18, McKenzie, who serves as the guarantor for her son’s student loans, began teaching her children about financial matters from an early age. She established brokerage accounts for them and emphasized the value of money. McKenzie acknowledges the substantial sacrifices made by parents in such situations. They limit their own indulgences, take fewer vacations, and grapple with increased stress levels due to the lack of downtime. However, she believes these sacrifices are essential.

McKenzie also took the opportunity to share her advice with fellow parents. She advocates for early savings, emphasizing the importance of starting early rather than assuming there is ample time. Diversifying investments and teaching children about making prudent financial choices based on needs rather than wants are additional key lessons.

For parents seeking to navigate the delicate balance between supporting their children and maintaining their own financial stability, Jeff Kreisler, the head of behavioral science at JPMorgan Private Bank, offers guidance. Kreisler acknowledges the inherent challenges associated with financial decisions, which often evoke strong emotions. He advises parents to approach such conversations by acknowledging that they are all part of the same team. Understanding the other person’s perspective and what they need to feel secure is crucial. Kreisler recommends grounding the discussion in shared values, intentions, and goals, rather than solely focusing on numbers. By emphasizing the meaning of money, such as security, comfort, opportunity, respect, reward, and influence, the conversation can delve into more significant aspects, including desires, fears, needs, and aspirations.

Kreisler further cautions that excessive financial support without incorporating learning, boundaries, and guidance can hinder children’s growth. If parents provide financial assistance to their adult children, it should be accompanied by opportunities and requirements that foster learning, personal growth, and responsibility.

In conclusion, the desire to provide the best for our children is natural, but it is vital for parents to strike a balance between supporting their adult children and safeguarding their own financial well-being. By establishing clear boundaries, engaging in open and honest conversations, and instilling financial responsibility, parents can empower their children to navigate the challenges of adulthood while securing their own financial future.

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