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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.
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 reasons that parents support their adult children can vary, but intentions are generally meant to be good.
“Parents naturally want to help their children,” said Ken Tumin, founder of DepositAccounts. “There’s often hope that some financial support will allow the adult child to become self-sufficient and successful.”
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.
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:
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.
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.
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:
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.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.