Parents With Older Kids: Time for Some Tough Love

A couple of months ago, I wrote a piece about parents of Gen Zers needing to exercise some tough love on the financial front. It appears that message needs to be driven home some more that sentiment extends beyond Gen Z.

Actually, a strong case can be made that with Gen Z being the youngest generation in the workforce and many of them still in college, it stands to reason that parent financial support is prominent. For other adult children, it should be less, but data confirm the opposite is true.

Obviously, it’s hard for caring parents to pass on helping their kids – regardless of ages – when it comes to finances. Some parents are apt to think ignoring such requests amounts to turning their backs on their loved ones. On the other hand, there are significant risks in extending long-term financial assistance to adult children. It’s simple math. Parents in their 50s and 60s that helping kids in their late 20s through early 40s are endangering retirement planning, saving for long-term care and likely trimming inheritances, too.

These are issues for advisors to be aware and advisors should also note the extent to which parents are supporting adult children. Hint: the percentage is high enough that advisors should discuss this issue with clients.

Heed Warnings in this Survey’s third annual review of parental financial support of adult children is arguably a call to action for advisors that care about their clients’ retirement readiness.

“47% of parents with grown children provide them with some form of financial support (not including adult children with disabilities). This is a similar rate to last year’s report,” according to the survey.

There are multiple important nuggets advisors should focus on. First, the survey says “adult children.” It doesn’t differentiate based on generations, implying parents are financially supporting offspring that are anywhere from Gen Z to Gen X and millennials in the middle.

Something else advisors need to discuss to financially doting parents is exactly why those parents are giving money to their adult children. Sure, there’s validity in helping an older child have the resources for a down payment on a house or giving them money for the grandkids’ educations, but says many respondents aren’t being so prudent.

“46% of parents who financially support adult children give them money for vacations and discretionary spending, and 18% help their adult kids pay off credit cards,” adds the research firm.

Obviously, it’s hard to tell an adult what they can and cannot do with their own money, but parents really shouldn’t be paying their adult kids’ credit card bills and funding vacations for them.

Consider Generational Issues

As noted above, it’s reasonable to surmise that Gen Zers are on the receiving end of the most parental patronage on a percentage basis and confirms as much, noting that the median age of adult kids still requiring cash from their parents is 22.

That sounds reasonable and it is, but it belies the point (also mentioned above) that some older children are still relying on mom and dad.

“Among parents surveyed, the median age by which they thought kids should be fully financially independent was age 25. Despite that opinion, many are still supporting children well over this age. Of parents providing support, 21 percent were helping Millennial (age 28-43) or Generation X (age 44-59) kids,” observes

Folks with children in their mid- to late 40s are likely well into their 60s and 70s, implying many aren’t working and they should be prudent with their spending, not helping grown kids take vacations. Advisors should drive that point home to clients.

Related: Tips for Advisors Considering Model Portfolios