Are you still supporting your Gen Z kid? It may do more harm than good.
Times are changing. Young adults are increasingly relying on their parents to get by today. A new report shows 50% of parents are still providing some sort of financial support to a child over the age of 18. And in turn, many of them are sacrificing their own financial security.
The new report from Savings.com found that parents are shelling out more than $1,400 per month to help their grown children. That's up 6% from last year, marking a three-year high. Generation Z adults (ages 18-28) are the highest recipients of financial help. However, their Millennial counterparts (ages 29-44), who have had time to build their own income streams, still need the extra help.
The report shows a majority of parents help their children with groceries, and more than half still pay for their phone plan as well. Many Gen Zers remain on their parents' health insurance plans due to increased age limits, a benefit fewer millennials have. When it comes to housing, the numbers are fairly similar: 66% of parents provide financial help for housing to their Gen Z children, while 58% do the same for millennials.
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A third of Gen Z lives with their parents
It's no surprise why young adults need the help. Year after year we see rising costs across a variety of expenses, including housing, healthcare and everyday living. Economists say 2023 was the least affordable homebuying year in more than a decade. These are among the reasons one-third of Gen Zers today are living with their parents.
Gone are the days when our children walked out of the house for the last time after graduating from college, or even high school. Instead, they are dragged down by student loan debt and earning wages barely enough to keep them afloat for the first one to three years in adulthood. Studies show that college graduates today often overestimate their likely starting salaries by as much as $30,000, leading them to live beyond their means. This is when many parents step in to offer the financial support their children need.
Parents often don't see their 'help' adding up. It's $50 here and there, or just $300 extra per month for rent. But when you calculate how much all the assistance adds up to, you'd be surprised. Consider that family cell phone plans usually cost $100 to $150 per month – with one line costing about $50 per month. The average monthly premium for someone's health insurance today is about $438. Plus, the average annual cost for auto insurance is $1,592, which comes out to about $133 each month. Altogether, that's roughly $621 per month in extra expenses for your child. And you can double or triple that if you have multiple kids.
Parents are sacrificing to help their adult children
While supporting adult children has shown to be sometimes necessary, parents need to balance this assistance with protecting their own financial future. The Savings.com report shows that 60% of parents who completed the survey admitted to sacrificing their own financial well-being to support their adult children. The reality of the situation means parents may lose out on their retirement plans and unintentionally create long-term dependency in their adult kids.
It's crucial for parents to find a balance between supporting their children and protecting their own financial future. One way to achieve this is by encouraging financial independence and setting clear boundaries. It can be as easy as setting up a budget and savings plan with your child, or as challenging as creating a timeline for when financial support will end.
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Setting boundaries is essential in order to protect yourself from overextending your help. Many parents will establish timelines for their assistance. Perhaps it's covering rent for six months until your child finds a full-time job. Parents can also pick and choose what they want to help support. You can offer to cover their cell phone plan and car insurance if they are fully responsible for groceries and rent. Or you can require a contribution or repayment. This might mean offering to help with student loan payments only if they also contribute 15% of their paycheck.
Brent Lister, President and CEO of First Florida Credit Union
The financial landscape today is vastly different from what it was when parents were young adults, and it's understandable that parents want to help their children navigate a challenging and often unforgiving world. But there is a line where additional financial support can do more harm than good.
Brent Lister is president and CEO of First Florida Credit Union.
This article originally appeared on Palm Beach Post: Gen Z financial support from parents could hurt everyone | Opinion
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