Parents Spent $500 Million on Their Grown Kids Last Year

Where did they get it and what is it buying?

Posted Jan 17, 2019

It’s coming from their retirement accounts—it’s twice as much as they usually put into them. Some parents are already withdrawing funds from those accounts or taking on additional debt. What Ken Dychtwald, CEO of Age Wave, calls “the hidden economy of support” for 18 to 34 year-olds is threatening parents who may want to retire but can’t afford to as well as those who want to keep working while their retirement savings keep pace with their future security.  

It’s not just the one-third of young adults who haven’t left home yet or have boomeranged back— that accounts only for $100 billion, or 20%, of their parents’ annual support. The rest goes to food and groceries (60% of parents), repaying student loans (27%), cell phone bills (79%), car expenses (44%), tuition (44%), vacations (44%), and rent or mortgage (36%) outside the family homestead. Seventy-nine percent of the 2500 parents surveyed by Merrill spend $7000 in these categories annually.

To some parents, that’s not a huge sacrifice. But 72% of the parents surveyed said they’ve put their children’s interests ahead of their own need to save for retirement. “I’ll worry about that then,” said a 52-year-old electrician whose 23-year-old is going to graduate school on his annual profit-sharing bonus. “Besides, she’ll be a doctor by the time I retire; she can support me then.” Says another, closer to retirement age herself, “I won’t be enjoying my golden years the way I’d planned to, in a condo in Florida, but she needs my help and that’s more important.” And few parents whose grown kids are still home consider letting them continue to live there as costing them actual money, except for one couple in San Francisco who would otherwise be getting $250 a night on Airbnb for their daughter’s room and bath (with a separate entrance!).

“Yes, I’ve sacrificed my own financial security for the sake of my children” said a 60-ish woman who spent her nest egg to pay her son’s legal bills. “It was worth it to keep him out of jail.”  Another one, who spent her divorce settlement on fertility treatments for her daughter, doesn’t regret doing it; “My grandchild is reward enough.”   Sixty-three percent of those surveyed report having made similar decisions—with and without regrets.

Too many parents don’t discuss retirement planning with their grown kids, or even discuss with their spouse what they want to support—their kids’ actual needs or their desires. Yet both those tasks are necessary, as well as laying out exactly what, and to what extent, you want and can afford to subsidize your grown children. It may be a difficult conversation, but one way to make it easier is to begin by telling them that the last thing you want is to ever be a financial burden on them and that the only way to avoid it is to secure your future yourself. Then lay out the financial facts of life—yours and theirs. Finally, put aside whatever guilt you may be feeling for putting yourself first—even if you can afford to do so. Because if you don't, who else will?


Richard Eisenberg, Money and Work,  102/18