Clients are so determined to help their kids financially that they are postponing their retirement. What’s more, parents are paying more of their adult children’s expenses than their parents did for them.
The culprit? Timing. Many millennials and other young adults came of age in the wake of the financial crisis. They’re also burdened by debt from their college years. Total U.S. student debt stood at nearly $1.5 trillion at the end of 2018,
“No wonder some parents say, ‘Your hill is a little steeper than mine was. Let me help you out,’” says Marcy Keckler, vice president of advice strategy at Ameriprise.
In a recent Ameriprise survey, just over half of respondents told the financial services firm i the next generation will have a harder time paying for expenses such as a first car or a first home, and a third said they have delayed retiring or would do so to support their kids.
The survey showed a clear desire among clients to do more for their children than their parents did or were able to do for themselves. For example, 80% of clients said they have helped or intend to help their children buy their first car, but only 54% said their parents had done them that favor. Forty-percent of respondents said they have helped or intend to help their children buy their first home, but only half that number report their parents did the same for them.
“As long as advisors understand that is their client’s intention, then they can plan for that,” Marcy says.
The danger for clients is not planning for, yet still paying for big-ticket items such as weddings, college and a first home at the cost of their own retirement. “You may end up in spot where you need to rely on your kids if you maybe helped them out [too much],” Keckler says.
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Keckler encourages advisors to speak with clients about these goals. “Are you planning on providing more than just college for your kids?”
Such discussions, she says, can cover a variety of approaches including whether to protect a client from risks if they choose to use their funds to help their children. Keckler also says advisors can help clients think beyond financial assistance.
“Helping your kids get a lifestyle they cannot really afford may not be giving them the financial independence they need to achieve… . It’s important to remember that they can pass other things to their kids,” Kecler says, pointing to financial values and literacy.
The survey, conducted with Artemis Strategy Group, polled 3,008 adults between the ages of 30 and 69 and who had at least $100,000 in investable assets.
