Parents with adult children are often closely linked in terms of finances, and the depth of those connections can sometimes threaten the retirement plans of the parents. This is according to new research released by home co-investing company Unison, announced on Thursday.
According to the results of a survey conducted in August 2019, 92% of American homeowners revealed that they have provided some kind of financial support for their adult children, while 53% of respondents say that as of the time of the survey, they currently provide some form of support.
“Of course parents want to help their children, but it’s worrisome that so many are putting their own retirement security at risk by doing so, especially considering that most American baby boomers are already severely undersaved for their own retirement,” said Unison CEO Thomas Sponholtz in a statement announcing the research results. “These results are yet another example that we need to present consumers with new solutions that enable to buy and own homes while meeting their other financial goals, including a secure retirement.”
By far the most common reason for parents offering financial support to their grown children revolves around college tuition, where 70% of respondents revealed that it motivated the assistance they provide. Other common reasons for parental help include general expenses (67%); transportation (64%); groceries (56%); car insurance (53%); medical insurance (52%); and student debt (41%).
Parents also provide assistance to their adult children by sharing certain resources with their kids. This extends to housing, where 53% of men and 64% of women have shared or are sharing their home, and 36% of homeowners with adult children have an adult child currently living with them. Of that figure, 53% say that child has lived with them for 5 years or longer.
Other shared resources between parents and adult children include cell phone service plans (57%) and streaming entertainment subscriptions to services like Netflix or Hulu (25%).
Half of surveyed parents who help their adult children financially express that doing so has demonstrably affected their own personal finances and, by extension, their retirement planning. In order to help their kids, parents shared that they have drawn from a savings account/CD (41%), 401(k)/IRA or other retirement fund (8%), taken out loans (8%), or tapped their home equity (5%). However, nearly half (47%) say the result of the assistance provided to their children is a lack of adequate savings activity.
The effect of helping adult children is also disproportionately affecting the finances of mothers versus fathers. According to the research, 55% of women say helping their adult child has affected their personal finances, compared with 44% of men. Additionally, 10% of women say they’ve gone into debt to help their adult child, compared with 6% of men.
Unison gleaned its findings from a survey conducted August 16 to 23, 2019, with data collection and sample provided by Dynata, a Texas-based market research firm. The survey questioned 2,000 American adults from a national sample who have not yet retired, are current homeowners, who have a household income of at least $50,000 or above, and who have been homeowners for at least 10 years.