1 in 3 Adults Rely on Parents for Financial Assistance Amidst Rising Cost of Living

As the cost of living continues to increase, more and more adults are relying on their parents for financial support.

A recent survey conducted by Credit Karma, a personal finance site, revealed that more than one-third of adults aged 18 and over from the millennial and Gen Z generations receive financial assistance from their parents. The survey was conducted in October and included responses from over 1,000 participants.

A recent report revealed that more than half of parents with adult children are living with them. Additionally, 48% of parents said they are covering their kids' cell phone plans, car payments, or other monthly bills. Furthermore, nearly a quarter of parents said they are providing their adult children with a regular allowance, paying some or all of their rent, or making them an authorized user on their credit card.

Courtney Alev, Credit Karma's consumer financial advocate, noted that what used to be a simple task of paying a child's cell phone bill every few months has now become a much more complex financial responsibility for many parents.

A recent report has revealed that one in five young adults have debt in collections. As a result of the pandemic, many members of Generation Z are spending the holidays at home with their parents. Additionally, the survey found that a majority of Americans, 63%, are living paycheck to paycheck.

The COVID-19 pandemic has caused a surge in the number of adults who have moved back in with their parents, a phenomenon often referred to as "boomerang kids". This is the highest rate of this occurrence in history.

Many individuals reported that they initially returned to their parents' home due to necessity or to save money. The large amount of student loan debt from college and the increasing cost of housing have made it difficult for those just beginning their lives. The rising cost of living and expensive rents are making it more difficult to move out.

A report from the Pew Research Center has revealed that the amount of households with two or more adult generations has increased fourfold in the past fifty years. This data was collected from the census from 1971 to 2021, and it is estimated that these households now make up 18% of the population in the United States.

According to Pew, financial concerns are the primary motivation for families to live together, which can be attributed to the increasing amount of student loan debt and the rising cost of housing.

In the last fifty years, the number of young adults living in a multigenerational household has increased significantly, now standing at 25%. This is a dramatic rise from the 9% recorded five decades ago.

The majority of individuals aged 25 to 34 are residing in the home of one or both of their parents. A smaller portion of this age group are living in their own home and have a parent or other elderly family member living with them.

It is not unexpected that when two or more generations live together, the older parents are more likely to cover the majority of the costs. According to Pew, the typical 25- to 34-year-old in a multigenerational home contributes 22% of the total household income.

For parents, however, providing financial assistance to their adult children can be a significant burden when their own financial stability is in jeopardy.

The current economy has seen the highest inflation rate in decades, leading to a significant increase in the cost of providing support. A survey conducted by Credit Karma revealed that 69% of parents who assist their adult children experience financial strain as a result.

Alev emphasized the importance of parents taking care of their own finances before providing financial assistance to their adult children.

She suggested that it is important to create a budget for your income and expenses, including savings, debt repayment, and if possible, contributions to a retirement fund.

Once you have taken care of your own financial needs, you can then assess how much you can realistically provide to your adult children. It may be beneficial to set a deadline for when they should be able to become financially independent. This will give them a timeline to work towards.