This month, young adults across the nation are donning graduation robes and tweaking resumes, while parents ready their Canons and Kleenex. At the podium, guest speakers will motivate and inspire, but they will likely omit one tiny detail: Many of those grads will remain financially dependent on their parents for years.
According to a new survey, 59% of parents provide financial support to their adult children who are no longer in school. The online poll by ForbesWoman and the National Endowment for Financial Education (NEFE) of 1,074 U.S. adults—non-students aged 18 to 39 and their parents—was conducted by Harris Interactive in May.
"Parents are continuing their involvement longer than we expected," says NEFE chief executive Ted Beck. "Financial pressures are higher for this generation. If I was in their shoes, I would be concerned."
Young adults are feeling the heat: 65% say the financial pressures faced by their generation are tougher than those faced by previous generations, and one in three parents agree that their offspring are worse off.
Today's young adults graduated into one of the worst recessions since the depression and carry a crippling college debt burden. Above the national average of 9%, unemployment rates spike to 14.2% among 20- to 24-year-olds and 10.2% in the 25 to 29 bracket. Meanwhile, the average four-year college student borrowed $24,000 in 2009–double the $12,000 she borrowed in 1993.
"Parents were expecting their kids to get jobs that were high paying enough to manage payments, but they are finding that they can't," says Jean Chatzky, financial editor for the Today show. "You don't want to see your kids struggle."
In fact, among the parents offering financial support 43% say they are "legitimately concerned" for their kids' financial well-being, and 37% say they have struggled and don't want their children to struggle too. Thus, they are providing financial assistance in record numbers and on a scale that ranges from occasional cash to complete dependence. The majority of parental help is housing (50%), living expenses (48%), transportation costs (41%), insurance coverage (35%), spending money (29%) and medical bills (28%).
New York-based psychologist and author of Face It, Vivian Diller, Ph.D., believes the trend extends beyond the economy. "In the last 20 to 30 years, the family structure has become more child-centered," she says. "Boomer parents were very willing to make sacrifices for their kids, giving them the sense that it would continue until they were on their feet. Now parents are supporting kids' lifestyles."
Diller says the trend may bring families closer. Among the young adults living at home, 75% contribute to the household financially—with groceries (52%), utilities (34%), gas for the family car (31%) and rent or mortgage help (29%)—and 42% provided non-financial help like cooking, cleaning or childcare. Those young adults are also expecting to repay their parent's goodwill as they grow older and begin needing more help themselves, says Diller.
However, increasing financial support could have dangerous side effects. "Because they have been protected, some children don't learn reasonable ways to manage money, and they run into trouble," Diller warns. "You can enable kids to become more independent, but you can disable them too."
One New Jersey designer, asked to be called Susan, worries that her adult children may depend too much on her assistance. She keeps her three college-educated children, ages 25, 27 and 29, on the family cell phone plan and pays for their state transit passes. Susan also occasionally helps her youngest daughter with rent and her oldest son with his expensive piano lessons, but she offers the most support to her middle child; he and his wife currently live with her. "I don't think it's healthy for him," she says. "There's a joy in being able to help your children, but you don't want them to be dependent on that help."
In Mangum, Okla., dad Tony Newcomb can relate. Despite his efforts to cut the ties, he says his 21-year-old daughter has remained completely dependent since she moved back home after her failed marriage. She works at a grocery-store bakery but counts on her parents for housing and transportation. "It's an ongoing effort to talk to her," he says. "She doesn't grasp the concept that we're doing all this and we have bills too." Unable to keep up with the costs, Newcomb decided to sell his car for a less expensive model.
According to the survey, many parents offering support have made sacrifices to do so: 30% say they gave up privacy since their children moved in, 26% have taken on additional debt, 13% forwent a life event like buying a home or taking a vacation, and 7% delayed retirement.
"Compromising your financial security is a mistake," says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. "If you can't take care of yourself, you won't be able to help your children in the long run."
Experts agree that today's young adults often need the help but caution parents against treating them like children. "Set clear expectations," advises de Baca. Parents should define the nature of the help—whether it is a gift or loan, how long it will be available, and what is expected of the young adult in order to receive the support. De Baca also suggests that once a plan is in place, parents should regularly check in to discuss and guide the young adult's progress, be it securing a job or saving for independent housing.
Finally, psychologist Diller councils parents to be aware of their motives. "Kids are hitting on their parents in that empty nest period, when they're ready to move on but still feel the loss of being needed," she says. "Psychologically, it's important for parents to stop feeling needed by their kids. They need to focus on their futures too."