Most parents provide some level of financial support to children during their college and perhaps even post-college years. The results of a new poll shows that the majority of parents in the Baby Boomer generation are continuing to provide assistance to their adult children to cover expenses in several areas.
According to the Ameriprise study, “Money Across Generations II” a large percentage of boomers admitted to providing financial aid to their kids. The researchers also broke these figures down by gender, revealing that 95 percent of fathers were more willing provide assistance versus 92 percent of mothers. The results show that 58 percent of men are willing to help their kids purchase a car, while 48 percent of women gave the same response. In addition, 42 percent of males said they have helped their kids by co-signing a loan or a lease agreement in contrast with 32 percent of women.
Fifty-one percent of fathers have admitted to covering the costs of their kids’ car insurance compared with 43 percent of women.
The study also reveals that the difference in how couples approach helping their children may cause financial friction that could put their own money management goals in jeopardy. Some boomers have already entered retirement and others are not far behind. Several studies have shown that inadequate saving and retirement planning have endangered many Americans’ nest eggs and this has been further exacerbated by the economic downturn, unemployment rates and stock market losses.
For these reasons, it’s crucial that couples talk about their feelings toward helping adult children and understand how it may affect their retirement. Individuals should evaluate their budgets, savings accounts, investments and potential medical needs and insurance costs before making their decisions. Reviewing these figures before making any decisions about aid can ensure that a couple is fully informed about where they stand financially and this may help drive their choice.
Many parents often feel guilty about turning away children to save for their own retirement. However, adults kids have several decades of working years ahead of them to build a solid financial foundation, while boomers may only have a few years left. Once retirees’ income has been spent, they may have little recourse other than taking on debt to meet their needs.