In today’s world, it can be pretty difficult for younger people to get those typical adult milestones that many of us take for granted, like buying their first home. So where do they turn? The “bank of Mom and Dad,” of course. A recent study found that 59% of parents are pitching in to help their kids financially, even though it’s causing some of them some financial problems.
Student Loan Increase
This data comes from a Pew Research Center report. In 2022, the average young person in America had about $16,000 to $20,000 in student loan debt. This is a pretty big increase compared to the $6,000 or so people had back in 1992. These debts are making it quite difficult for young people to save for other adult things.
Is It Worth It?
While education can sometimes lead to better jobs and higher paychecks, the huge student loan that comes alongside it might make it not worth it. Young people have to carefully weigh the advantages of going to college against its costs. They need to be realistic about their future earnings before deciding to go.
The High Cost of Homeownership
Buying a home has also become practically impossible for most young people. The average cost was over $495,100 in September 2023, a huge increase from an average of $426,056 in June of the same year. This is even with the mortgage rate reducing slightly. Young people who want to buy a house have to rely on their parents to help them.
The Bank of Mom and Dad
According to the report, 59% of parents are helping out their kids financially to make these big purchases. For some of them, this isn’t too much of an issue, but for 36% of parents, giving this financial support is actually causing them their own issues. They’re struggling to help out while also looking after their own cash.
Milestone Difficulties
This isn’t a recent trend, as even in 2022, a different Pew Research Center report found that the majority of young people think their financial challenges are worse than those of their parents. Most of them believe that saving for the future, paying for college, and buying a home are harder for them. Even so, most of them believe getting into college and finding a job is easier.
Living at Home
It’s no surprise that approximately one-third of all young adults in America haven’t left home. After all, money’s tight, and going solo has become more expensive than ever, especially for those under 25. Thanks to these huge financial obstacles, over half of this group still lives at home.
Continued Help
But the help doesn’t stop once they’ve moved out, as some young people still rely on their parents once they’ve got their own place. For example, 20% of young people who bought a home got help from their family to make a down payment. Clearly, the bank of Mom and Dad has no expiry date.
Everyday Expenses
Parents are also coughing up cash to help their kids with day-to-day stuff like phone bills or even doctor’s visits. On the positive side, this ongoing financial support can help ease the burden for young people so they don’t fall behind. But at the same time, this may stop some of them from developing smart financial skills and learning how to save properly.
Good News
It’s not all bad news, though. The data shows that older generations’ assets have ballooned, giving them a safety net that many young people don’t have yet. Their investments have grown quite significantly, which has put them in a better position to offer financial support. Sadly, younger people aren’t getting anything similar.
Older and Wealthy
Similarly, research shows that although they represent only 11% of the American population, people aged over 70 have more than 30% of all wealth in America. They have made gains of over $14 trillion since 2019. People aged between 55 and 69 have 42.4% of the nation’s wealth, and those under 40 have 6.7%.
Young People Investing
Some young people are investing, as data shows that 66% of them have made a number of different investments, particularly in cryptocurrencies like Bitcoin and Ethereum. People aged under 26 are particularly keen on diversifying their investment portfolios. This suggests they’re trying to be more proactive about getting wealthier.
Self-Care First
Several economists have advised parents to look after themselves financially before giving money to their kids. After all, if you’re looking after your own savings, you’ll be in a better spot to help your children without doing too much damage. According to one report, parents should save around $300 a month from birth to send their kids to college.
Giving More
Anyone living at home should still try to pitch in to help their parents, such as with grocery money or help with the rent. This can keep the family finances balanced and give young people a sense of responsibility. It also prepares them for the economic planning they’ll have to do on their own in the future.
Teaching Good Habits
But it’s not just up to the kids. Parents need to help their children grasp money management from a young age. They should teach them how to save wisely and avoid debt whenever they can. It’s also important for them to know how to spend without splurging so they fully understand the value of money.
More Financial Conversation
Many families are starting to openly discuss finances at home, which is always a good thing. Young adults are learning about budgeting and investing from their parents. This open communication is important because it can help prepare young people to make their own financial decisions.
Working Multiple Jobs
Over 50% of young people are working multiple jobs to make ends meet. This includes gig economy roles like food delivery and freelancing in other industries. In today’s economic climate, a single income just doesn’t cut it, and they’ve got to look elsewhere to cover their expenses.
Changing Careers
Likewise, lots of young people are rethinking their idea of a successful career. They’re looking at different industries and types of careers, which includes taking on less traditional roles. Sometimes, these less desirable positions fit with their lifestyles and values in a way that mainstream jobs can’t.
Alternative Education Opportunities
Going to college isn’t the only way to get an education anymore, either, as there are plenty of online courses and certifications as well. Many young people are turning to alternative education to get the qualifications they need because they’re more flexible and cheaper than a four-year college degree. This is changing how young people are preparing for the workplace.
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