In a report from NBC News, half of U.S. parents with a child older than 18 provide them some form of financial support. Today’s economic environment shows that many parents are still helping their adult children financially, even as the kids have grown up and are participating in the workforce.

While financial independence is a goal for many people, they face distinct challenges due to ever-changing conditions. Millennial and Gen Z adults rely more on their parents, while the parents, in turn, face obstacles in meeting retirement goals.

This week, we’ll discuss the growing financial challenges that younger generations face, the importance of setting financial boundaries to protect parents and adult children, and ways to promote financial literacy to attain independence.

Why Are Younger Generations Dependent on Their Parents?

To understand the situation that Millennials, Gen Z, and their folks are in, it’s important to touch base on the economic conditions that they are facing.

A study from Savings.com sums up the situation. Their latest annual report found that half of the parents with adult children surveyed still provide their kids with financial support. On average, parents are providing around $1,474 monthly.

Millennial and Gen Z adults face challenges distinct from previous generations. They include:

• A rising cost of living (rent, utilities, food, and transportation) makes independence harder to sustain.
• Student loan debt and other forms of debt reduce the availability of disposable income.
• Wage growth is not keeping up with inflation.
  

On top of that, housing affordability is an issue. The cost of rent in many places has made living alone prohibitively expensive, especially for younger working adults.

What Most Parents Pay for and How It’s Affecting Them

Because of these challenges, parents are still supporting their adult children financially. In the Savings.com report, the top expenses that surveyed parents help cover include:

• Groceries
• Cell phone usage
• Healthcare
• Rent or mortgage
• Tuition or school costs
  

There are several obstacles parents face as they support their children.

First, parents risk their financial independence when assisting their adult children. They may find it more challenging to reach their retirement savings goals, or may already find themselves using their savings. This may prevent older parents from living their desired lifestyles.

Another consequence of ongoing financial support is that children may be less engaged in developing responsible money habits and seeking independence.

Overall, parental financial assistance is a multi-faceted topic that requires understanding, compromise, and cooperation to ensure that adult children and their parents can live the lifestyles they want without impeding one another’s financial well-being.

We’ll cover some strategies that may help both parties. 

How Parents and Adult Children Can Set Financial Boundaries

Parents can help their children seek financial independence in many ways. Likewise, children can do their part to empower their parents to exercise financial autonomy.

Here are ways that parents can do their part:

• Encourage children to strengthen their financial literacy. Talk about budgeting, money management, and taking actionable steps to practice these skills.
• Have open conversations about financial responsibilities. Discuss what you are willing to help cover and for how long. Also, reasonable timetables should be discussed so adult children can create an action plan to attain independence.
• Be explicit about your boundaries. Let your children know where you will “draw the line” regarding assistance. Be prepared to differentiate between luxuries and necessities when children ask for support.
  

Adult children can also do their part to respect their parents’ decisions. Children should:

• Have honest conversations on where you need support and why. Talk with your parents about your financial goals and responsibilities. Be prepared to determine how your parents can reasonably support you, and understand where they are coming from if they say “No.”
• Take on financial responsibilities where feasible. Talk to your folks about where you can assist paying for certain things, such as your share of the utilities bills or cell phone and data use. Doing your part will help you and your parents in the long run.
• Help your parents where possible. If your folks are willing to assist you financially, don’t hesitate to pay it forward. Discuss how you can help your parents in exchange for their assistance. Even if money may be tight, you can help your parents in different ways. Have open conversations with them to see what you can do to make their lives easier.
  

Financial assistance can go a long way, but this support should also be grounded in mutual understanding and cooperation. When both parents and children see each other’s challenges, there are opportunities for both parties to achieve their goals.

First Florida is your partner in navigating your finances. Explore our website for more financial tips and resources.