When’s The Right Time To Turn Off The Tap?

Nearly half of young Americans rely on the bank of Mom and Dad to get by — When’s The Right Time To Turn Off The Tap?

Chris Clark  Mon, July 22, 2024   Moneywise

A new report from Bank of America suggests Gen Zers are relying on financial help from Mom and Dad — a “parent trap” that raises big questions about financial independence and the long-term impacts on their parents’ financial health, particularly their retirement savings.

The study found that 46% of adult Gen Z-ers rely on financial help from their parents, ranging from covering everyday expenses to helping with significant financial commitments such as rent, mortgage payments and other debt repayments.

About one in four respondents to BoA’s study said housing expenses were a chief barrier to financial independence, and over half said they do not pay for their housing.

Rising costs of living, inflation, student loan debt and economic instability have made it increasingly difficult for young adults to achieve financial independence. The COVID-19 pandemic exacerbated these issues, leading to job losses and reduced income that disproportionately affected younger workers.

The Bank of America study highlights a significant trend of young adults relying on their parents, but it’s essential for parents to recognize the long-term risks. By setting clear boundaries, providing financial education and gradually reducing support, parents can help their children become financially independent while safeguarding their own futures.

Risks to parents

While providing financial assistance to adult children can be a way for parents to show support and ensure their children’s well-being, it comes with significant risks, chiefly the impact on the parents’ own financial security and leaving their children unprepared to handle their own finances.

Financial expert Suze Orman warns that continuing to support adult children can severely compromise parents’ ability to retire comfortably. Orman argues parents often underestimate the long-term financial implications of this support, which can reduce their own savings when they need it the most.

Impact on retirement savings

Parents who use their retirement savings to support their adult children may find themselves in a precarious financial situation. Some parents are still supporting their children well into their 40s, delaying their own retirement and putting their financial future at risk. This prolonged financial support can lead to parents working longer than planned or significantly adjusting their retirement lifestyle to accommodate the shortfall in savings.

TO READ MORE:  https://www.yahoo.com/news/finance/news/nearly-half-young-americans-rely-142500016.html