Money in the Media #3

Study: Parents Skimp on Retirement to Support Adult Children

In this week’s edition of Money in the Media Mondays, we’re deep diving into an article from Yahoo! Finance called, “Study: Parents Skimp on Retirement to Support Adult Children”. The author of this article, Kristin Myers, reviews a Bankrate study on when it is appropriate for the kids to take over their bills from mom and dad.

Paying for Your Adult Child’s Bills? Why?

The study shows that there is a strong difference of opinion on when parents should stop paying for their children’s bills. These bills can include cell phone, car payments, health insurance, housing costs, credit cards and student loans. Most notably, there is a difference of opinion between generations. The younger generations are of the belief that bills should be paid for a bit later and the baby boomers are of the belief that the sooner, the better.

The age that Millennials and Baby Boomers believe they should pay their own bills compared to the average. Graphic David Foster

The looks of this chart and the fact that the younger generations feel that expenses should be covered later in life indicates something. Clearly, the younger generations ARE having many of their expenses covered by their parents later in life. Why is this? College.

The rising costs for students vs the slow increase in salaries to enable them to pay their bills have created this situation where many young adults are not able to support themselves during and immediately after their college education. Check out this Marketwatch article to compare your former or local schools tuition over a 30 year time period to see what I mean. It will also show you how much having a part time job may have helped paying for those costs.

Tuition vs Salary Chart from Marketwatch

The MUCH Bigger Problem This Creates

Parents are NOT saving for retirement because they’re trying to help out their adult children. This is an absolute travesty and will only delay the struggle for the children they are trying to assist, until the parents are no longer able to support themselves in old age.

While 60% of parents with higher incomes ($80k and higher) were more likely to put their retirement savings on the line, nearly 20% of those making less than $50k weren’t saving anything at all, the study showed.

While it may seem like the necessary selfless act of being a parent to forego your own well being for the sake of your child, I caution you to reconsider. The burden of paying rent, a cell phone bill and a student loan payment will be peanuts compared to the cost of long term care for an aging parent (or two). Not to mention that by then, they may have adult children or kids in college that they will want to help out as well.

Brainstorm Together

When I say to take care of your retirement savings before paying for your adult children’s phones, cars, college, etc., I do NOT mean throw them out into the street with a tin cup. I mean take the opportunity to speak with them and have an honest discussion about how you may (or may not) be able to help them without sacrificing your own future.

Possible solutions may be:

  • Lowering their necessary costs by offering to let them move back home until they can manage on their own two feet.
  • If they are still in school, having them apply for scholarships to ease some of the financial burden of college, even if they have a full tuition scholarship. There are living costs to consider.
  • Helping to find them a higher paying position, either part time or full time.

Whatever your solutions may be for your specific situation, the goal is to have this path forward work for everyone AND ensure that it will be a temporary measure so that all costs are transferred over to them as soon as is feasible.

Were you ever in the situation where you had to help your adult children pay their bills or had to have your parents help you when you were first starting out? Are you currently in this situation? How did/are you handling it? Let me know in the comments below!

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