A recent poll showed that due to the pandemic, parents have helped their adult children financially, often at the expense of their own financial well-being.
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The pandemic has had widespread financial consequences in the U.S., and many Americans have turned to their parents for help.
According to a new CreditCards.com poll, almost half of parents with adult children (45%) have helped their kids financially during the pandemic – and 79% reported that they gave money they would have used for their own personal finances.
Of those parents who helped out, the average amount they gave was $4,154. And 47% gave more than $1,000, including 18% who gave in excess of $5,000 and 28% who gave more than $2,500.
The most cited reasons parents contributed to their adult kids’ finances were to use for food (47%), housing (33%), cellphone payments (27%), car payments (23%), paying off debt (21%) and entertainment (11%).
Seventeen percent said they gave their kids money for “something else,” and 13% gave without knowing what the children would spend it on.
While it’s admirable to help your kids financially, you should be careful, warned Ted Rossman, senior industry analyst at CreditCards.com.
A 2019 Bankrate.com survey found that about half of people who lent money to family and friends experienced a negative consequence, such as losing money or damaging the relationship.
“Be very clear about your expectations,” Rossman stressed.
For instance, he said, do you expect to be paid back, or is the money a gift?
Rossman thinks it’s best to present it as a gift to limit the potential for hard feelings. He cautioned not to lend or give more than you can afford to lose.
“The adage about putting your oxygen mask on before helping someone else comes to mind here,” Rossman said.
See related: How to manage your credit cards during the coronavirus outbreak
Parents helping adult children financially poll: key findings
Here are some other major results from our poll:
- How parents would have used the money they gave: Many said they would have used at least some of the money to pay down their own debt (33%). The rest said they would have used at least part of it on daily expenses (27%), emergency savings (27%), retirement (16%), discretionary expenses (14%) and investing (10%). A small percentage said they didn’t know what they would have spent the money on (11%) and 6% said “something else.”
- Parents’ incomes factored in: Among parents with annual incomes in excess of $80,000, more than half (56%) gave an average amount of $8,530 to their children over the past 13 months. Out of those parents whose income was between $40,000 and $80,000, almost half (49%) gave an average amount of $2,170. Of the parents who fell in the less-than-$40,000 income bracket, 42% gave an average amount of $1,403.
- Geographical giving: Parents who lived in the four Census regions were equally likely to help their adult children financially, but the average amounts they gave differed. Parents in the South gave an average of $5,018, while those in the Midwest gave $4,234, residents of the West gave $3,573 and those in the Northeast gave $2,861.
The survey of 3,925 U.S. adults was conducted online between April 7-12, 2021. See survey methodology.
Regional variations track with the percentage of job losses
Nate Tsang, CEO of WallStreetZen, said regional variations in how much parents gave their kids seemed to track with the percentage of job losses.
For example, he said, the East Coast was hit hard – New York shed about 10% of its jobs, and other states had a 6% to 8% loss, while the South experienced fewer job losses at 3% or 4%.
There are exceptions, Tsang said – Louisiana, with its oil and gas and entertainment industries, lost close to 8% – but overall, parents kept working in the South and Midwest and were perhaps better able to help their children out.
Meanwhile, in the East and West, there was belt-tightening going on all around, so they couldn’t provide as much support to their children, he added.
But Travis Holoway, CEO and co-founder of SoLo Funds, thinks the geographical patterns could be due in large part to the majority of American wealth being concentrated in coastal states and cities versus the South and Midwest.
Many parents in the Midwest may be blue-collar workers who have watched the American dream of their kids doing better than them erode decade by decade, he said, with higher-paying manufacturing jobs in the automotive and steel industries significantly reduced.
This generational change has led to their children working lower-paying hourly jobs and the industrial shift has also significantly increased the number of Americans living paycheck to paycheck who need financial assistance, Holoway added.
See related: Taking financial control amid a pandemic
Offer your children something other than money
Andrew Latham, certified personal finance counselor and managing editor of SuperMoney, said it’s heartwarming to see so many parents were willing to help their adult children during the pandemic.
But he’s concerned about parents doing it to the detriment of their own finances.
If your adult children are going through serious financial difficulties, he said, it’s probably better to help them out by having them move back home rent-free. Housing is the largest expense for American households, taking up approximately 32% to 41% of their budgets, according to the U.S. Bureau of Labor Statistics.
Latham also said that it’s better if the children dip into their own retirement funds – if they have them – since they have more time to rebuild their savings.
See related: How to pay rent with a credit card
Low starting salaries out of college, student loan debt and expensive housing prices all present financial challenges for many young adults – add in the pandemic, and those challenges might have become a downright struggle.
It’s natural for parents to want to help their children get through difficult times but if you do that, make sure you plan for it so that it doesn’t significantly impact your finances, spell out your expectations clearly and consider other options for providing support.
CreditCards.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3,925 adults, including 1,334 adults with at least one child 18 years old or older and 615 who had given their adult children money since the beginning of the COVID-19 outbreak. The poll was conducted online from April 7-12, 2021.
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