Actress Nia Vardalos (best known for starring in “My Big Fat Greek Wedding”) once told Good Housekeeping magazine, “Becoming a mom to me means that you have accepted that for the next 16 years of your life, you will have a sticky purse.”
It’s funny ‘cause it’s true.
What’s less funny is that, whether a mom or a dad, you’ll probably have a light wallet, too—and for a lot longer than 16 years.
New research from Merrill Lynch and Age Wave found that parents in the U.S. spend about twice as much a year on adult children ($500 billion!) than they contribute to their 401k or similar account ($250 billion).
As if raising a person from infancy to age 18 isn’t costly enough—it’s estimated to be around $230,000—data revealed that many parents today offer ongoing financial support to their children well into adulthood.
Almost eight in 10 survey respondents with 18- to 34-year-old “kids” say they continue to pay for some of their expenses. The most common costs covered are groceries, cell phone bills and car payments or repairs.
Another four in 10 contribute to, or pay entirely for, their grown children’s school expenses (understandable) and vacations (less understandable).
A quarter of respondents give their adult kids money for rent, and a third put money toward their student loans.
“In this new era of delayed financial independence of young people, financial planning is no longer a solo or coupled activity. It’s become an ongoing family project with longer and different social, housing and economic interdependencies than we’ve seen before,” Ken Dychtwald, Ph.D., CEO and founder of Age Wave, said in a statement.
Adult children are likely enjoying this arrangement in the present without realizing how it may impact them in the future. Parents who are failing to prioritize their own finances over their children’s just might need their kids to return the favor down the road.
Nearly three-quarters of parents say they have put their kids’ interests ahead of their need to save for retirement. Eight in 10 kind parental souls even say they’d make a major financial sacrifice for their adult child.
Half admit they’d draw down savings, 43 percent would scale back their lifestyle and a quarter would go into debt or pull money from their 401k or other retirement account.
For many, the generosity shows no sign of stopping, which could further worsen their retirement outlook. Well over half of parents expect to help pay for their child’s wedding, around one in four plan to chip in on their kid’s first home and a third want to contribute to their grandchild’s college tuition.
“When emotions and money become intertwined, parents risk making financial decisions that can compromise their—and their children’s—financial futures,” warned Lisa Margeson, head of Retirement Client Experience and Communications at Bank of America Merrill Lynch.
Her advice: “Parents can navigate this difficult balance by setting clear boundaries about their level of support, fostering financial independence in adult children, and reconciling spending on children with long-term savings goals to avoid jeopardizing their own financial security.”
Jessa Claeys is a writer, editor and graphic designer.