Supporting Adult Kids, Aging Parents Costs American Family Budgets $630 Billion
August 05, 2015 07:03AM — Eastern Daylight Time OMAHA, Neb.–(BUSINESS WIRE)–Although Americans surveyed say providing monetary support to a family member is not a financial struggle, many also maintain high debt levels and have delayed major life milestones to provide this financial assistance.
TD Ameritrade’s 2015 Financial Support survey explores the struggle Americans feel towards helping a family member in need while still in debt themselves, and reveals key differences between Generation X and Baby Boomers.1
The Real Cost of Financial Support
One in five Americans (22 percent) provide financial support to a parent and/or an adult child (“Financial Supporters”).
- Over the past year, Financial Supporters have given $12,000 of support on average – that’s an estimated $630 billion from the US economy.2
- Few report that providing this support is causing them great financial hardship: only 22 percent say they needed to use their savings to provide financial help while 30 percent made small sacrifices and lived more frugally.
- However, Financial Supporters hold almost $100,000 in debt on average: $22,000 in unpaid credit card balances, personal lines of credit, or personal or student loans, and $75,000 in mortgage debt.
Generational Differences and Emotions Play a Role
- Half of Generation X (49 percent) think they have more financial responsibilities than their parents’ generation and 39 percent feel their generation will never have as secure a financial life as their parents’ generation.
- Financial Supporters say they are glad to be able to help the family member they support (64 percent are very glad to help a parent and 53 percent report the same about a child) and would sacrifice more if needed, while a third (36 percent) would delay their retirement to financially support their adult children.
- But, if forced to choose, 83 percent of Financial Supporters would support an aging parent over an adult child.
- Financial supporters are almost twice as likely to be supporting a mother (42 percent) than a father (23 percent) and mothers receive $5,000 more support.
- Most (69 percent) Financial Supporters who support their adult children will do so until their children find well-paying jobs.
Tough Conversations Can Lead to Financial Solutions
- Conversations about financial support most often happen when the family member asks for help (44 percent discussing with parents, 52 percent discussing with children).
- The majority (79 percent) have not discussed financial support of others with a financial professional, and only half (49 percent) have discussed it with the person whom they support.
- The top conversation topics between Financial Supporters and whom they support are money management (54 percent) and reducing the need for support (50 percent).
“The financial downside of living longer may mean not only planning for our own extended retirement years, but also caring for aging family members in ways that can take a solid bite out of any well-laid plans,” said Matthew Sadowsky, director of retirement at TD Ameritrade, Inc., a broker-dealer subsidiary of TD Ameritrade Holding Corporation. “And even beyond the financial implications, this could have an impact on family dynamics. With older generations it can be an especially difficult conversation to have. But, it’s better to have the discussion and do some detective work now – as well as some planning – than get hit with a daunting financial reality later.”