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Disclaimer: I’m not a parent, but I have been on the receiving end of some “tough love” from my parents. In those moments, children, including adults, are likely to feel unpleasant. Down the road, those feelings are likely to change for the better.
With that in mind, parents of Gen Z kids might want to consider applying some tough love because data indicate many of these parents are sacrificing their own financial well-being for a generation that as of yet isn’t rewarding that faith. Yes, that’s painting in broad strokes, but consider new findings from the St. Louis Federal Reserve's Institute for Economic Equity, which include the point that many 18-24-year-olds – the oldest Gen Zers – are neither working nor in school.
“In 2022, more than 1 in 3 U.S. young adults (defined as those ages 18 to 24) reported having no wage or salary income, up from 1 in 5 young adults in 1990,” according to the study.
Of course, those kids need to eat, be clothed and have roofs over their heads. That doesn’t include discretionary items such as smartphones and cars. But if those kids aren’t working, it’s parents that are picking up the tabs for those items and with some of the parents of older Gen Zers being in their late 40s or early to mid-50s, they’re jeopardizing their retirement savings to pick up the slack for adult children.
Parents of Gen Z Are Already Making Sacrifices
Many of us can remember our own parents telling us that certain big-ticket items we wanted as kids weren’t tenable within the confines of the family budget. In my lifetime, I can remember my parents “rejecting” my desire for expensive baseball cards then Air Jordans and ultimately a car due to financial constraints.
I think it worked because I learned some valuable life lessons and baby boomers that followed similar parenting tactics were able to bolster retirement accounts along the way. Unfortunately, some parents of Gen Zers are taking a different approach and it’s to their own detriment.
“Over two-thirds (68 percent) of parents of adult children have made or are currently making a financial sacrifice to help their kids financially, according to a new Bankrate survey. Parents say they sacrificed retirement savings (43 percent), emergency savings (51 percent), paying down their own debt (49 percent) or reaching a financial milestone (55 percent),” according to a 2023 poll by Bankrate.
It’s easy to see why parents of Gen Zers are making these sacrifices. In 2022, 35% of those in the 18-to-24 age cohort reported having no income at all, up from 22% in 1990.
“If these zero-wage young adults are included in the calculation of average annual income, the income growth that occurred after 2007 disappears. This is striking because the labor market in 2022 was the strongest on record, and yet real incomes inclusive of zero-wage young adults remained essentially unchanged as this group made up an increasing proportion of the young adult population,” adds the St. Louis Fed.
When Helping Is Hurting
The message here isn’t that parents should allow their young adult kids to starve or be homeless. Not at all. However, the parents shouldn’t be sacrificing things such as credit scores and retirement savings to support working-age kids or those not attending school.
Actually, ongoing financial support of children that aren’t actively pursuing education or jobs harms both the parents and the offspring and that’s something that cannot be ignored.
“(Paying for your child’s bills) can enable bad behavior or stunt an adult child’s development,” notes Bankrate Senior Industry Analyst Ted Rossman. “It can also put your own retirement and other financial goals at risk. You can get loans for a lot of things, but retirement isn’t one of them.”
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