Forty-five percent of parents have given their adult children money since the beginning of the COVID-19 pandemic, according to a recent survey by CreditCards.com. And 79% of those who helped their children said the money they gave otherwise would have been spent on their own personal finances.
Personal finances included paying down debt (cited by 33% of parents), taking care of day-to-day expenses (27%), adding to their emergency savings (27%), beefing up their retirement savings (16%) and investing (10%).
Of the parents who gave their children money, 47% gave more than $1,000. Twenty-eight percent gave more than $2,500, and 18% gave more than $5,000. The average amount given was $4,154.
The propensity to financially assist adult children rises with household income. Forty-two percent of parents whose household income is less than $40,000 gave money to their adult children, averaging $1,403. Nearly half (49%) of parents whose household income is between $40,000 and $80,000 gave money to their adult children, averaging $2,170, and 56% of parents in households with an annual income of more than $80,000 gave their children money, averaging $8,530.
Geographically, the amount of money that parents gave to their adult children varied widely. The average amount in the South was $5,018. In the Midwest, it was $4,234. In the West, it was $3,573, and in the Northeast, $2,861.
“While it’s admirable to help your kids financially, you should be careful,” says Ted Rossman, senior industry analyst at CreditCards.com. “A 2019 Bankrate.com survey found that about half of people who lent money to family and friends experienced a negative consequence such as losing money or damaging the relationship. Be very clear about your expectations. I usually think it’s best to phrase it as a gift to limit the potential for hard feelings.”
People who gave money to their adult children said it was used for: food (47%), housing (33%), a cellphone (27%), a car (23%), paying off debt (21%) and entertainment (11%).
An earlier study by the Center for Retirement Research (CRR) at Boston College found that when children leave their parents’ house, the parents have more money to save for retirement—although the increases in their 401(k) contributions typically range from a mere 0.3% to 0.7%. One financial planner says this may be due to the fact that even after their children leave their home, parents continue to support them financially.