The Bank of Mom and Dad Stays Open — Even When It Can Hurt Parents Financially
May 2, 2022
Among parents with children aged 18 and over, 79% are willing to help their adult children financially.
A third (33%) of parents with children under 18 would be willing to take on credit card debt to help them financially when they become adults.
Among adults with living parents, 65% would ask their parents for financial help if they needed it.
Americans are legally considered adults at the age of 18, but most are not financially independent by that age. Simultaneously, many parents are willing to keep the Bank of Mom and Dad open to their adult children through their twenties and thirties, even if it can hurt them financially.
Tally explores this phenomenon in a new survey of 2,062 U.S. adults ages 18 and older, conducted online by The Harris Poll on its behalf. Among parents with children aged 18 and over, 79% are willing to help their adult children financially. This could be anything from paying their rent or mortgage, making a down payment on a house, buying a car or covering other living expenses.
Most parents are comfortable helping their grownup kids. Only 17% of parents of adult children say they are not in the position to help their adult children financially. And few set boundaries. Just 4% say they would not help their adult children financially under any circumstances.
But providing financial help often comes at a cost. When asked what they would be willing to do to help their adult children financially, many parents of adult children (56%) would dip into their own savings. Two in five (40%) say they would co-sign a loan for their adult children. Another 28% say they would pause saving for retirement, make an early withdrawal from their retirement savings or both.
But there is a line that most parents will not cross. Only 1 in 5 parents of adult children (20%) say they would be willing to take on credit card debt to help them financially. However, parents who already carry credit card debt (30%) are more likely to be willing to do this than parents who do not have credit debt (14%).
The “Bank of Mom and Dad” mentality starts early
The willingness to financially help adult children starts young: 91% of parents of children under 18 say they would be willing to help their children financially when they become adults. This sentiment was stronger for men. Dads of young children (93%) are more likely to say this than moms of young children (87%).
Only 7% of parents of young children say they don’t think they would be in a financial position to help their children financially when they become adults and just 2% would not help their children financially under any circumstances when they grow up.
When it comes to helping young children in the future when they become adults, it seems parents are generally more willing to hurt themselves financially for their future adult children’s sake. When asked what they would be willing to do to help their children financially when they grow up, more than 2 in 5 parents of younger children are willing to “dip into their savings” (45%) or “work overtime or take on a side job for extra income” (43%). Another 38% say they would be willing to pause saving for retirement, make an early withdrawal from their retirement savings or both. This was followed by 36% who would co-sign a loan for their future adult children.
Taking on credit card debt was also a likely option. A third (33%) of parents with younger children would be willing to take on credit card debt to help them financially when they become adults. Similar to parents who are willing to financially help their adult children, parents of younger children who already carry credit card debt (44%) were more willing to take on credit card debt to help their children when they are adults than parents who did not have credit debt (23%).
Never too old to ask for financial help
Having parents who can offer a financial safety net is a privilege. Adults who have this privilege are more willing to use it — no matter how old they grow. Among adults with living parents, 65% would ask their parents for financial help if they needed it. This could be anything from paying their rent or mortgage, making a down payment on a house, buying a car or covering other living expenses. Only 20% say they would never ask their parents for financial help. Even fewer (16%) say they wouldn’t ask because they know their parents cannot help them financially.
While it should come as no surprise that younger adults are more likely to lean on their parents for financial help, the definition of “young adult” can extend to adults in their 40s. Among those with living parents, Gen Zers, 18 to 25 year olds, (80%) and Millennials, 26 to 41 year olds, (71%) are more likely than Gen Xers, 42 to 57 year olds, (54%) and Baby Boomers, 58 to 76 year olds, (51%) to say they would ask their parents for financial help if they needed it.
Though many are never too old to ask for financial help, adult children do have some boundaries. Among those adults with living parents, 23% would only ask their parents for financial help if they had no other options. This sentiment was generally consistent across most generations: Gen Zers (25%), Millennials (23%), Gen Xers (19%) and Baby Boomers (28%).
That said, nearly a third (29%) of adults with living parents say they have no problem asking their parents for financial help. Only13% would hesitate to ask their parents for financial help.
3 exit strategies to help your adult kids leave the financial nest
Tally’s personal finance expert Bobbi Rebell CFP® offers the following advice to help parents close the bank of mom and dad and launch financial grown ups.
Avoid concierge parenting
We’ve gone past helicopter parenting and become concierge parents, ready to solve all of our children's problems, which often involves throwing money at the issue. We want to smooth things over for our kids, rather than letting them experience any sort of financial challenge. Don’t let money be the first thing you offer to show support.
If your adult child runs into a financial hiccup, listen carefully, let them know you care, ask them for ideas on how to resolve the issue, and only after hearing them out, showing empathy, and offering some feedback (without judgment) should you offer your own advice. If they need money, encourage them to look at cutting expenses, and/or pick up extra hours at work or even get a side hustle. They need to develop confidence that they can figure out solutions to their own financial challenges to stop the cycle of coming to the Bank of Mom and Dad to solve their problems. A mark of successful parenting is for your child to no longer need you for financial support. It may feel strange at first when they can support their own life, but it means you did your job.
Don’t help when it hurts you financially
Putting your own financial health at risk to help your adult kids is a big no-no. Taking on debt to solve their problems, especially as interest rates are rising, is creating more problems — both for you and for them. Like in an emergency on a plane, put on your oxygen mask first. It’s no different in this scenario: get your own finances in order first. Pay off your own debt first, if you have any. This is especially important if you have high-interest credit card debt — it’s going to get more expensive as interest rates rise.
Prioritize investing into your own retirement — and whatever you do, do not pull from your retirement accounts to help your kids. Helping your kids at your own expense may set them up to have to support you financially as you age, and no one wants that, especially your kids.
Teach your kids about debt
Debt can be a helpful tool when starting your adult life, when used properly. Unfortunately, too many young adults take it on without understanding how interest works. Educate your kids on how debt can be used as a helpful tool in certain scenarios, like building a credit score or funding their education. Just make sure they understand the tradeoffs of a smaller monthly payment versus shorter payback period. For example, if they’re planning to take on a student loan, help them to develop a realistic payback plan. Start by calculating roughly what their monthly payments and how much interest they will pay at the end of the loan. Encourage them to take their career choices into account as they take on this debt and consider the type of lifestyle they want as adults.
More importantly, let them know that you will not pay off their debt, but that they can come to you for advice. You are a guide to help them navigate this new phase of adulthood, but you’re not their bank. It helps to be transparent about your own financial obligations as well, including debt.
This survey was conducted online within the United States by The Harris Poll on behalf of Tally from February 24 to 28, 2022 among 2,062 U.S. adults ages 18 and older, among whom 571 are parents of kids ages 18+, 609 are parents of kids under 18, and 1,380 have living parents. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact email@example.com.