Dallas parent Joel Williams was happy to see his 25-year-old daughter, Natalie, graduate two years ago and land an exciting career for herself in social media marketing in Austin. Last year, she started a new job in IT sales right when the world began to shut down due to COVID-19.
A sales job in a pandemic wasn’t the place to be. No one returned her calls. Natalie couldn’t network face to face. She was let go in June. Then she got the virus herself and couldn’t look for a new job. She moved back in with her dad in Dallas.
“She felt like she wasn’t supposed to be living with her dad at 25,” her father said. “But this is unprecedented. There are a lot of people her age out there who are going through the same thing, and she’s lucky to have me to fall back on.”
The pandemic has been a once-in-a-lifetime event creating unique and serious financial issues for adults of all ages, but especially younger ones without established careers or savings accounts.
Almost 50% of parents with adult children gave their kids money during the pandemic, according to a survey of 3,925 adults in April 2021 from Creditcards.com. Of those who helped out financially, the average amount given was $4,154.
Ted Rossman, a senior industry analyst at Creditcards.com and Bankrate.com, said the consumer finance sites had a hypothesis that a lot of parents were supporting their adult children financially, and the survey proved them right.
“This is a big deal. Almost half are giving money to their children, and it’s having real effects on them,” Rossman said.
Nearly 80% of those who gave their adult children money said they could have used that cash for something else during the year.
“It’s really fallen hardest on young adults because they’re early in their careers with less saved up and high student loan burdens, especially the older millennials,” he said. “They’ve had the double whammy of coming of age in the financial crisis, graduating into a tough job market and right when they’re hitting their stride, COVID hits.”
“Younger adults who tend to work in the service industry and other essential jobs made less money in the past year, while older office workers were more likely to continue their job from home,” Rossman said.
While it’s OK to help your children, you need to make sure you’ve got “your own oxygen mask on first,” Rossman said.
You can also help by letting them move back home or watching the grandkids while they look for a job, both less expensive options than giving money, he said. If you give financially, it should be clearly defined, such as whether it’s a gift or should be paid back and whether it’s a one-time payment or ongoing.
“Times have been tough for a lot of people over the last year, and some may not realize that the one doing the giving is also struggling,” Rossman said.
Bowman Hallagan, a managing director at Bernstein Private Wealth Management in Dallas, said his firm has seen more families having important financial discussions in the past year, such as how to involve their kids in their philanthropic efforts and how to transfer wealth to their kids.
Thanks to baby boomers’ wealth built on stocks and real estate investments, the U.S. is currently undergoing the greatest wealth transfer in history. An estimated 45 million households will transfer more than $68 trillion over the next 25 years, according to Cerulli Associates.
Dallas-Fort Worth-based Benold Financial Planning business, which targets Texas family physicians and health care professionals, saw a big revenue and profit increase last year as more people needed help.
“The pandemic was a great catalyst for these conversations because you had a full house, a captive audience of people who weren’t going on vacations or to visit friends,” Hallagan said. “So you had a captive audience to have uncomfortable but needed conversations from a family perspective.”
Jordan Benold, a certified financial planner at Benold Financial Planning, said he’s also seen more than just parents helping kids. He sees clients helping brothers, sisters-in-law and other family members much more than in past years. The main reason to help financially has been job loss, he said.
One client is paying the mortgage for his daughter. Another is letting his brother stay with him while he gets his GED. Another couple liquidated their brokerage account because their kids needed money. Another client who runs his own business was out of cash and borrowed some from his parents with a loan agreement.
“Financial planning is a little of counseling and a little of financial management and a lot of listening,” Benold said. “In this period, people opened up more because there is a bigger burden on them.”
Benold’s advice to those helping family members monetarily is to consider the money a gift so relationships don’t sour. For lenders who expect to be paid back, the terms should be clear from the outset. Dallasite Dennis Cali recognized the awkwardness that can pop up when close friends or family lend to each other and created the lending app Zirtue to formalize these types of loans.
Joel Williams said parents have a responsibility to help their kids whether they get paid back or not and his time to do so is coming to an end. Natalie started working as a Realtor at Frisco-based Monument Realty this week.
While he isn’t putting as much money toward retirement and investments, Williams said it’s been a joy to have Natalie home. His older daughter is married with kids and is jealous of the extra time he and Natalie have together, Joel said.
“It’s been fun. She asks me fashion advice sometimes like what shoes go with which dress, and she gives me dating advice,” he said. “The plus side of it is the unusual opportunity to spend time with my daughter that I wouldn’t ordinarily get.”