5 Reasons Your Adult Children May Need Help Financially

As noted in our recent post, Should You Help Your Adult Children Financially?, the children of the Boomer generation have faced a different financial landscape as compared to their parents.

The situation is not confined to the United States. For example, Chinese workers between 16 and 24 are experiencing a 21.3% unemployment rate, spurring a trend of some parents paying their adult children the equivalent of a full-time salary to live at home and help around the house. Some call it being paid to be a kid.

While no similar trend has been reported in the U.S., post-Boomer generations struggle with specific impediments in their quest for financial independence. 

1. Housing Blues

Housing costs have prevented young adults from progressing financially. A 2021 CNBC analysis showed that between 1965 and 2020, home prices exploded by 118% compared to a mere 15% increase in household income during the same period after adjusting for inflation.

This has resulted in Millennials (adults aged 28-44) lagging the Boomer and Gen X generations in home ownership by age 30, according to Apartment List's 2023 Millennial Homeownership Report.

Another way to look at this is that, in 1981, the average home buyer was between 25-34. Today, the average homebuyer is 44.

Further analysis in the report also showed that Millennials who still rent have become increasingly pessimistic about ever becoming homeowners in recent years. In 2018, 13% said they expected to be renters forever. By 2022, this jumped to nearly 25%. Although the pandemic was partly responsible for the sharp increase, the overall rise in the cost of buying a home is likely the main driver of this trend.

Those who rent are not immune from rising costs. Average monthly rents have increased 8.85% per year since 1980, while inflation over the same was 3.09% on average.

For those adult children who buy a home, parents frequently help financially, usually by contributing via gift or loan for a downpayment. Of homebuyers between the ages of 24-32, 22% depended on help from a friend or family member. Also, in the same age group who saved up for a downpayment, student loans, and credit card debt were major factors in extending the time needed to accumulate the money by a median of three years.

2. Student Loan Load

According to data from the National Center for Education Statistics (NCES), average undergraduate college tuition cost more than tripled from 1963 ($4,336 in 2020 dollars) to 2020 ($13,777). When federally guaranteed student loans debuted in 1965, many Boomers with college degrees often could cover higher education costs through employment earnings, help from their families, scholarships, etc. Their children were not so fortunate since these money sources were not enough to keep up with runaway tuition inflation.

As a result, student loan indebtedness has ballooned to $1.78 trillion with an average monthly payment of $503, which the typical borrower will pay for 20 years.

This has had a profound impact on the financial stability and wealth-building ability of student loan borrowers, who generally range from 20 to 40 years. As author Anya Kamenetz (Generation Debt, 2006) states, these borrowers are "waiting longer to get married and have children, making people less likely to own a home, start a business or leave their hometowns."

Want to learn more about helping your children financially? Click here or the button below to download our Helping Your Adult Children Financially: Volume 1 – Why They Need Help eBook.