A recent report indicates that approximately 50% of parents are still providing financial support to their Gen Z and millennial children, costing them nearly $1,500 monthly on average. However, this financial assistance may soon decrease as parents are poised to reduce support.
Despite millennials approaching their 40s, many parents continue to financially assist them. The report from Savings.com reveals that roughly half of parents support at least one adult child over the age of 18. Generation Z members receive the highest support, averaging $1,813 per month, while millennials receive about $863. This level of spending has reached its peak in three years, as inflation impacts workers of all ages.
The report highlights that Gen Z individuals receive substantial support because they are in the early stages of their careers and have not yet established sustainable income streams. Conversely, millennials, aged 29 to 44, are further along in their careers with greater financial independence. Despite about 92.5% of adult Gen Z working full-time, their salaries are often insufficient to meet rising living costs. Parents, facing their financial challenges, may not continue providing support for long.
In terms of specific support, parents cover an average of $220 monthly for groceries for their adult children. According to the report, 87% of parents supporting Gen Z contribute to grocery and food expenses, 73% cover cell phone bills, and 69% help with health insurance. Furthermore, as housing prices soar, 66% assist with rent or mortgage, and 57% cover education costs.
Parents striving to shield their adult children from financial challenges may be jeopardizing their own future security. They spend 2.3 times more on their adult children than on their retirement accounts, averaging $1,589 monthly for their children, compared to $673 for retirement savings. About 47% of parents have sacrificed their financial stability for their children, with four in ten feeling pressured to provide support, even at the expense of their comfort. Nearly 90% would make further financial sacrifices for their adult children.
However, parental support is not sustainable indefinitely, and Gen Z and millennials may soon need to manage independently. About 37% of parents plan to cease financial support within two years, and another 28% within three to four years, with the primary intention to promote financial independence. The report warns that halting support amid a potential recession could negatively impact younger generations.
Despite the potential cessation of parental support, Gen Z is expected to gain significant wealth. According to Bank of America, they are anticipated to become the largest and wealthiest generation by 2035, comprising 30% of the global population and accumulating $74 trillion by 2040. Though current financial pressures may lead Gen Z to rely on parental support, their incomes are expected to rise as they progress in their careers, prioritizing financial security over job satisfaction. Moreover, a substantial ‘great wealth transfer’ is projected, with $84 trillion passing from older generations to Gen X, millennials, and Gen Z by 2045.
This article was originally published on Fortune.com.
