Parents in the U.S. now spend $500 billion annually on their 18- to 34-year-old adult children – twice the amount they contribute each year to their retirement accounts ($250 billion)1, according to a new Merrill Lynch study conducted in partnership with Age Wave. The study also found that nearly two-thirds of parents report having sacrificed their own financial security for the sake of their children. Even with the financial challenges and sacrifices, over 90 percent of parents say that parenting is the most rewarding aspect of their lives.
There are 173 million parents in the United States today, 76 million with children under 18.2 While 89 percent agree there is “no normal” when it comes to parenting, there are common patterns as the journey unfolds. “The Financial Journey of Modern Parenting: Joy, Complexity and Sacrifice” takes an in-depth look at the financial and emotional journey of contemporary parenting. This study marks the third in a multi-year research series from Merrill Lynch and Age Wave that examines five distinct life stages: early adulthood, parenting, caregiving, widowhood, and end of life/legacy.
“Parenting can be one of the most fulfilling and identity-shaping experiences of a person’s life – and with it comes a lifelong financial commitment,” said Lorna Sabbia, head of Retirement and Personal Wealth Solutions for Bank of America Merrill Lynch. “Planning ahead for the major financial costs can limit surprises down the road and help parents safeguard their own financial goals.”
The study surveyed more than 2,500 respondents in the United States who are over age 18 and a parent to one or more children – biological, adopted or step – of any age. Key findings include:
According to Ken Dychtwald, Ph.D., CEO and founder of Age Wave, “In this new era of delayed financial independence of young people, financial planning is no longer a solo or coupled activity. It’s become an ongoing family project with longer and different social, housing and economic interdependencies than we’ve seen before.”
Lisa Margeson, head of Retirement Client Experience and Communications at Bank of America Merrill Lynch reflects, “When emotions and money become intertwined, parents risk making financial decisions that can compromise their – and their children’s – financial futures. Parents can navigate this difficult balance by setting clear boundaries about their level of support, fostering financial independence in adult children, and reconciling spending on children with long-term savings goals to avoid jeopardizing their own financial security.”
Age Wave is the nation’s foremost thought leader on population aging and its profound business, social, financial, health care, workforce, and cultural implications. Under the leadership of Co-founder Dr. Ken Dychtwald, CEO, Age Wave has developed a unique understanding of new generations of maturing consumers and workers and their expectations, attitudes, hopes, and fears regarding their longer lives. Since its inception in 1986, the firm has provided breakthrough research, compelling presentations, award-winning communications, education and training systems, and results-driven marketing and consulting initiatives to over half the Fortune 500. For more information, please visit www.agewave.com. (Age Wave is not affiliated with Bank of America Corporation or Merrill Lynch.)
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1 Calculation based on parents’ contributions as reported by their adult children ages 18-34 across 14 expense categories and IRS data on employees’ elective contributions to the full range of retirement accounts.