Leaving the Bank of Mom & Dad

The Millennial generation often gets a bad reputation for being unmotivated, over-confident in their abilities, and a host of other hyperbolic stereotypes. Often overlooked are those millennials, like those in other generations, that work hard, save their money, and spend responsibly.

However, when more than one-third of adult millennials receive regular financial support from their parents, according to a November 2014 survey by Bank of America, you do start to wonder what exactly is going on with Generation Y. For the purposes of this post, I’m talking about millennials born between 1980-1995 (which may or may not encompass all millennials, depending on how you define the generation).

At age 20 or above, when does parental support become too much, and when do millennials have an obligation to try to survive on our own? The answer may surprise you, depending on how you feel about receiving support from your parents or how you were raised!

The Recession Didn’t Help Millennials

Let’s face it: unemployment among millennials is pretty darn high. The unemployment rate for college graduates ages 20-24 as of August 2014 was 10.8 percent. According to the Bureau of Labor Statistics, for those with a Bachelor’s degree, the number was 10.6 percent. Even for those who graduated with a degree struggle to find a job, and those are the lucky ones who graduated at all.

Without stable employment after graduation, it makes sense that more millennials are asking parents for help. Combine lack of steady employment with rent costs (not to mention groceries, healthcare, etc.), and it’s no wonder that millennials still rely on their parents for incidentals – or more.

To put it into perspective, here is a short list of things parents are helping their children pay for:

• 50 percent are providing a place to live
• 48 percent are helping with living expenses
• 41 percent are helping with transportation
• 35 percent are helping with health insurance
• 29 percent are providing spending money

Is It The Parents – Or Us?

As an older(ish) millennial, closer to 30 than to 20, I’ve had a lot of opportunities to see how parents and children’s money relationships work. In college, many people received assistance from their parents. For some, parents provided gas money, whereas others had tuition and anything else they wanted paid for.

After graduation, some people still relied on parents. I was admittedly one of those people – my parents helped pay for my apartment (which I shared) when I went to graduate school. Others traveled or volunteered abroad, and some others couldn’t find full-time work.

Approaching 30, most of my peers don’t receive help from their parents any longer. Most also have full-time jobs, and more than half have spouses. At this point, most are self-sufficient – or should be. Unfortunately, I still know some people who rely on their parents for everything, from car insurance to rent to clothes.

As Bloomberg News reported, one couple gives “their 22-year-old daughter tens of thousands of dollars each year to supplement the $30,000 she earns as a writer at a beauty website.” This money covers her “share of the rent on a Brooklyn apartment, her frequent use of Uber car services, clothing purchases, and regular manicures and pedicures.”

At that point, are parents really helping or hurting? It’s a tough question to answer, because parents’ relationships with children are not often logical. Also, some parents really do have the financial ability to lavish money on their children, having already taken care of their own retirements. On the other hand – money for manicures? Come on now!

Financial Ability

One of the very first things to consider, whether you’re a Millennial asking for help or a parent offering, is whether or not parents have a financial capability to help out. In many cases, parents are likely not in a position to help their children.

According to Bloomberg News, couples ages 55 to 64 had just $111,000 in savings for retirement in 2013 (the median balance in 401(k) and IRA plans). That amounts to a little more than $4,000 a year in retirement, assuming an annual 4 percent withdrawal rate.

Taking this a step further, are you prepared to help out your parents in the future if they need it? One thing I’ve always considered, as an only child, is my ability to help out my parents in their retirement years if they need it. Obviously, we all want our parents to take care of themselves in retirement, but reality doesn’t always work out that way.

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While many millennials didn’t graduate at an optimum time, we still have to be aware of our financial relationships with our parents. There’s no one “right” financial relationship to have with one’s parents, but if you’re still relying on Mom and/or Dad to survive, you may want to consider taking on a side hustle to set yourself on a financially stable path.
What type of agreement did you have with your parents when receiving financial assistance, either in college or at another time? Did you have an agreement to pay your parents back, or was it considered a gift?