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An All-Too-Familiar Tale: Parents Who Give Money to Adult Children May Be Putting Their Own Financial Health at Risk

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Sometimes generosity can have a downside. At least, that’s the conclusion we came to as we read this 2021 CNBC report, prepared by reporter Michelle Fox. Based on recent survey data, a significant number of U.S. parents have been supporting their adult kids financially, starting during the COVID pandemic – and they’re still providing regular funds. The problem is, often mom and dad’s generosity is getting in the way of their own financial well-being.

Nearly Half of U.S. Parents Supported Adult Kids Financially

“Many American parents are financially supporting their adult children at the expense of their own financial wellness,” Fox writes. She bases her report on survey conducted last year, which included 1,334 parents with a child 18 or older. Of that group, 615 parents – almost half – had supported an adult child financially during the pandemic. According to the survey, 79 percent of these generous parents said that those funds would otherwise have gone towards their own personal finances.

The amounts these parents gave was significant. “It wasn’t just chump change,” CNBC reported. “Those with an annual household income of less than $40,000 gave an average of $1,403, while those with a household income of $40,000 to $80,000 gave $2,170 on average. Parents who had an annual household income of more than $80,000 gave their kids an average $8,530.”

Industry Analysts Say Some Parents are Putting Their Own Finances at Risk

Ted Rossman, senior industry analyst at, said these generous impulses have a definite downside. “This [giving] is holding them back from paying off their own credit card debt,” he told CNBC.  “It is impacting their ability to save for the future.” As evidence, Rossman cites the survey finding that almost 8 out of 10 of the parents who gave money to their adult kids since the beginning of the COVID pandemic said they would have had other ways to put those funds to good use.

According to the CNBC report, here’s how these parents told surveyors they would have spent the money they gave away:

  • Paying down debt, 33 percent
  • Day to day expenses, 27 percent
  • Boost emergency savings, 27 percent
  • Add to retirement savings, 16 percent
  • Discretionary spending, 14 percent
  • Investing, 10 percent
  • Other, 6 percent

Much of the Gift Money Went Toward Basic Necessities – but Not All

How did the adult kids use mom and dad’s gifts? “Most of the money parents gave their children was used for food and housing,” says CNBC. Other big categories included cell phone bills, car payments, even entertainment. About one-fifth of recipients used the gifts to pay down debt.

Here’s how the survey reported on the use of money from parents, says CNBC:

  • Paying for food, 47 percent
  • Paying for housing, 33 percent
  • Helping with cell phone bills, 27 percent
  • Helping with car payments, 23 percent
  • Helping pay off debt, 21 percent
  • Entertainment, 11 percent
  • Other/don’t know, 30 percent.

Generosity is Natural and Admirable, but Should Also Be Realistic

CNBC’s Fox spoke with New York financial planner Lawrence Sprung, who agreed that it’s only natural that parents want to help their children – especially during the recent pandemic. However, he cautioned, parents need to guard against setting the wrong expectations, especially when it comes to helping younger adult kids.

“We want to ultimately help our children to become self-sustaining members of society and not rely on mom and dad every time they make a misstep,” Sprung told CNBC. According to the article, Sprung advocates drafting a payback agreement. Parents should also insist that their kids get some financial education and counseling so they’ll be better prepared for the future and avoid repeating the same mistakes.

Beware: Loaning Money Can Damage Relationships

As CNBC advises, loaning money to a loved one, even your own child, may not always be the wisest idea. In fact, financial planner Rossman and many others suggest giving the money outright, if you can afford to, with no expectation that it will be repaid. That’s because of research that shows how loaning money to a loved one can have ugly unintended consequences.

For example, CNBC cites this 2019 survey by “Despite good intentions,” said the survey report, “lending money to friends and family can often lead to some uncomfortable situations.” Bankrate surveyed almost 2,500 U.S. adults and found that 60 percent had helped out a friend or family member by lending cash with the expectation of being paid back. About one-fifth had cosigned for a loan and one-sixth had loaned a loved one their credit card.

Of these, more than one-third said they were negatively impacted by the transaction, meaning they lost money, suffered a damaged credit score, or experienced harm to their relationship. The Bankrate article also quotes industry analyst Ted Rossman who offers clear advice. “I’d avoid lending cash and credit cards and co-signing,” he says. “All too often, these situations end poorly.”  In other words, if you do decide to help out, make sure you’re willing to consider that money gone for good.

“If you really want to do it, only offer as much assistance as you can afford to lose,” Rossman says. “In your mind, assume it’s a gift and that you won’t get paid back. Let that sink in ahead of time so that a negative experience doesn’t harm your relationship along with your account balance.”

Make Sure You Consider Your Own Goals and Needs

So, as we ponder these articles from CNBC and Bankrate, we’re left with the dilemma: do I help out my adult kids or not? The key is to plan well and be honest with your family. “Make sure you don’t hinder your ability to retire or reach your own goals,” CNBC advises. As Lawrence Sprung told CNBC’s Fox, “Financial wellness is something that needs to be planned for and monitored, [and] ultimately your children need to learn this, too.”

This seems like the ideal time to recommend one of the most important planning tools you can have: a financial dashboard. Too often we make financial decisions – even big ones – in a vacuum. But with a financial dashboard in place – customized specifically for your situation – you can see at a glance how today’s decisions affect tomorrow’s fiscal health. If you’ll contact us at AgingOptions, we’ll be glad to refer you to a financial planner who can help you prepare a financial dashboard of your own.

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When it comes to retirement planning, most people focus on one fairly narrow issue: money. Financial planning is an important component of retirement planning. However, people heading towards retirement often make the mistake of thinking that a little financial planning is all that’s required, when in fact most financial plans are woefully inadequate. What about your medical coverage? What if you have to make a change in your housing status – will that knock your financial plan off course? Are you adequately prepared legally for the realities of retirement and estate planning? And is your family equipped to support your plans for the future as you age?

The best way we know of to successfully blend all these elements together – finance, medical, housing, legal and family – is with a LifePlan from AgingOptions. Thousands of people have discovered the power of LifePlanning and we encourage you to the same. Simply visit our website and discover a world of retirement planning resources.  Make certain your retirement planning is truly comprehensive and complete with an AgingOptions LifePlan.  Age on!

(originally reported at

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