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Updated on Monday, April 5, 2021
Adulting can be hard, but many parents truly try to make financial decisions easier for their kids.
In a new MagnifyMoney study using Federal Reserve data, we found that parents 55 and older who support their adult children have an average net worth of $2.2 million, which is more than double that of the average net worth of parents who don’t.
In other words, those born with a silver spoon in their mouths often get to keep that spoon into adulthood. But that doesn’t mean their spoonless peers are completely on their own as adults either.
- Key findings
- Parents who support their adult children have an average net worth of $2.2-plus million
- Parents who support their adult children have almost 4 times more in directly held stocks than parents who don’t
- It’s not just rich households that support adult children
- How to stop financially supporting your adult children
- Parents who support adult children have an average net worth of more than $2.2 million, more than double that of the average net worth of parents who don’t support their adult children financially ($929,709).
- A higher income doesn’t always correlate with more parents supporting adult children. The same percentage of households with incomes of $54,916 to $88,392 and $135,693 to $416,293 support their adult children.
- Parents who support their adult children provide $12,815 annually, on average.
- The largest gap in assets among parents who support their adult children and those who don’t is in stock ownership. Parents who support their adult children have nearly four times more in directly held stocks than parents who don’t.
Parents who support their adult children have an average net worth of $2.2-plus million
Have more, share more? So it would seem. Whether you look at net worth, income, retirement or savings, parents who financially support their adult children (those 18 and older) have more of…everything.
The biggest disparity between those who support their adult children and those who don’t can be seen in net worth. Those who support their adult children have an average net worth of $2.2 million, which is more than double the $929,709 average net worth of those who don’t.
But it can be seen in other areas of their financial lives as well:
- The average income of parents who support their adult children is more than double that of those who don’t — $195,919 versus $91,910.
- The average retirement account balance of those who support their adult children is $168,324, compared with $91,637 for those who don’t.
- The smallest difference can be seen in savings account balances — $22,475 for those who do versus $16,371 for those who don’t — but it’s still 1.4 times as much.
Why parents support adult children
The reasons that parents support their adult children can vary, but intentions are generally meant to be good.
In some cases, that works out fine. Maybe the adult child has some bad luck, and some financial support will allow them to get back on their feet. Other times, though, that adult child will take advantage of the assistance and not make an honest effort to become self-sufficient.
It’s not just for one-and-done reasons — such as emergencies or special purchases — that parents are giving their kids help on. Many provide assistance to pay for recurring costs.
According to a 2019 survey from Pew Research Center, 45% of young adults ages 18 to 29 who had received financial help from their parents in the past 12 months said it was for special circumstances. Another 28% said it was for recurring expenses, while 27% said it was for both.
Parents who support their adult children have almost 4 times more in directly held stocks than parents who don’t
When you look elsewhere — from home value to stock ownership — parents who support their adult children still tend to have the most. In fact, the difference can be seen drastically when it comes to stock ownership. Those who support their adult children have a total value of directly held stocks that is nearly four times more on average than those who don’t — $229,796 versus $60,407.
This also holds true across other assets:
- The average house value of those who support adult children is $392,424, compared with $248,583 for those who don’t — a difference of 1.6 times.
- The average money market account balance of those who support adult children is 2.7 times more than that of those who don’t — $42,057 versus $15,747.
- The average total of investments is 3.6 times higher for those who support adult children than those who don’t — $135,927 versus $38,077.
It’s not just rich households that support adult children
While it’s true that those with the highest incomes ($416,294 and up) have double the rate of households supporting adult children than those with the lowest incomes ($0 to $14,000), it’s those in the middle income ranges that offer support most frequently.
Percentage of households, by income, that support adult children
|Parent income range||% of households that support their adult children|
|$0 - $14,000||3%|
|$14,001 - $32,705||15%|
|$32,706 - $54,915||19%|
|$54,916 - $88,392||20%|
|$88,393 - $135,692||16%|
|$135,693 - $416,293||20%|
Source: Federal Reserve Survey of Consumer Finances.
While only 6% of households in the highest income range support their adult children, 20% of those making $54,916 to $88,392 and $135,693 to $416,293 do. Close behind, 19% of parents making $32,706 to $54,915 support their adult children.
Tumin said these disparities may have to do with lessons learned.
“Those with income ranges at the high end may be more concerned about their financial support preventing the adult child from becoming a responsible adult who lives on a budget, saves and works hard toward realistic life goals,” he said.
Tax implications of supporting adult children
While MagnifyMoney’s research showed that parents who support their adult children provide an average of $12,815 a year, the federal gift-tax exclusion amount for 2021 is $15,000. That means the average amount provided to adult children wouldn’t be taxed, but those who give above that threshold may be.
How to stop financially supporting your adult children
Pushing your children out of the financial nest can be difficult, but it’s often best for everyone’s nest egg down the road. Here are some tips that may help:
- Start financial education early. The earlier that kids learn about the value of saving, the magic of compound interest and the dangers of debt, the better. Talk to them regularly, set up a savings account for them and help them learn to budget.
- Set rules and limits. If it’s a loan, make it clear in writing that’s signed by all parties. “The parents should write an agreement that documents the size of the support, the expectations they have for the child and the time frame of the support,” Tumin said. “That will make it clear that the support is temporary and is intended to be just to help them get back on their own two feet.”
- Provide support in other ways. Parents can support their children in numerous ways without giving them money. Things such as helping them find a job, suggesting ways to save (such as micro-investing apps) or offering them free child care on occasion so they can save money on child care will let them know that you’re there for them but won’t without costing you a dime.
Researchers analyzed data from the Federal Reserve 2019 Survey of Consumer Finances — the latest available data — to compare the financial health of parents who support their adult age with parents that don’t financially support their adult children.
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