A recent survey by Bankrate.com finds 68% of parents surveyed have made a financial sacrifice to help their adult children with money. Nearly a third said that they financially sacrificed "significantly," while 37% reported that they only sacrificed "somewhat."
The message of the survey and ones like it is to reinforce a basic message of the personal finance industry: Older parents need to be very wary of helping out their adult children financially. Generosity with money can put a comfortable retirement at risk. That is true with extreme cases and, more commonly, some older parents have too little to share in their elder years. Yet for most people it makes sense to build the pooling of resources among family members into financial planning, including retirement planning.
Finances are only a part of a much larger narrative about intergenerational interdependence and intergenerational reciprocity. For example, older parents may help their adult children pay down debts and meet school expenses. They will open their home and financial support to get their adult child through the trauma of divorce and send money to help pay bills after an adult child is laid off from their job. Grandparents may provide free child care, perhaps on a regular schedule or at least some of the time.
Yet adult children often provide time and financial assistance to aging parents as caregivers. Almost 3 in 4 millennial family caregivers are employed, according to the AARP Public Policy Institute. The care may be somewhat minimal, say, taking on tasks such as grocery shopping. The commitment increases if the mental and physical health of aging parents declines sharply. Working caregivers routinely report in surveys that they turn down promotions, steer clear of taking on additional work responsibilities, leave work early and even quit their job.
Multigenerational living is making a comeback. According to a Pew Research Center analysis of census data from 1971-2021, the number of people living in multigenerational family households quadrupled during that time period, reaching almost 60 million in March 2021. The share more than doubled as well, to 18% of the U.S. population. One third of adults in multigenerational households say caregiving for children and aging parents is a major reason behind choosing the living arrangement. Again, the important insight is mutual support and generational reciprocity.
Sharing and pooling resources among family and close friends is fundamental to personal finances, not an anathema to sound household finances. Don't be afraid of mutual support. Plan on it.
Chris Farrell is economics contributor to the Star Tribune, Minnesota Public Radio and American Public Media's "Marketplace."
