Boomers often financially support their adult children
It’s becoming a growing trend for boomer parents to help their adult children buy their first home and even cover regular expenses such as rent, groceries and loan payments.
A number of surveys show that up to an astonishing 93% of parents provide, or have at one time provided, financial support to their adult children or grandchildren in some of the following ways:
- 50% provided a place to live
- 41% paid for transportation
- 57% helped with expenses
- 29% gave their adult children spending money
- 19% made emergency deposits to their children’s bank account
- 24% helped pay loans or credit card debt
- 7% helped with, or provided the entire down payment for a home
- 6% provided some other type of assistance
Most parents are quite generous.
A TD Ameritrade survey (2017) found that adults aged 19 to 37 received an average of $11,000 in financial support from their 50- to 70-year old parents. They claim that without their help they couldn’t support their current lifestyles.
Another poll by CIBC (2017) reports that 65% boomer respondents would rather help their kids become independent than have them live under the same roof.
Passing on an inheritance
Many boomers are increasingly using gifts (an early inheritance) to help their children while they are facing life’s steepest up-front costs, rather than having them wait until later in life.
Nearly 75% of parents aged 55 and older are ready to pass some or all of their own inheritance on to the younger generations.
“Better they enjoy it now than when we’re gone.”
They are especially most likely to give their kids money for a deposit on their first home. 54% of first home buyers in the last quarter of 2016 had financial help from their parents with the average amount given of $85,000.
The downside is the fact that once you give a gift you can’t control what the beneficiaries do with it. Half the parents in the CIBC poll want to have a say in how their financial gift is used. Nearly 30% worry their kids won’t use the money wisely.
The bottom line
Sometimes financial aid is a one time boost that kids need to get back on track. You may not want your child to struggle financially, especially if you once did.
Parents and grandparents also find satisfaction in seeing their offspring enjoying their generous gift.
But, don’t do it at the expense of your own retirement. You can’t sacrifice your own financial stability in an attempt to rescue your adult kids and put your own plans on the back burner. Increasing longevity means your money has to last longer. You don’t want to create hardship for yourself by putting too much pressure on your retirement budget.
It’s important to evaluate your ability to meet your own goals before offering any kind of support. Make sure the gift is money you’ll never need in your lifetime.
Have you ever given your kids a major financial gift or helped them out with their regular expenses?