With all of the joy that having a child brings, it also brings a slew of costs. Those costs change over time, but they are ever-present, because children can’t pay their own way.
But when does that financial support end? When do parents expect their children to begin to pay for their own expenses?
Spectrem’s new study, Parenting and Financial Decisions, examines the cost of parenting with an eye toward how advisors can help with decision-making, and the expectations parents have of their advisors in budgeting for both present and future costs related to raising children.
Investors at varying stages of parenthood were surveyed, including those who have no children but intend to start a family soon, and those who have children already, including those who have at least one child still at home as well as those who have seen their children move out and move on.
The advantage of knowing how investors feel regarding the financial independence of their children comes in knowing how to budget family income with family investments, with an eye toward the day when those investors are no longer financially supporting their children.
One of the questions those investors were asked was “when do you determine your children are financially independent and should no longer rely on you financially for support?” Among all investors, the most popular answer (35 percent) was “When they have a full-time job”, which likely happens when the child has completed their education. That answer does not, necessarily, mean they are out of the house, and parents with adult children still at home but working need to structure household finances to determine how to “bill’’ their at-home adult child for the cost of living with them.
The second-most popular response (27 percent) to when parents should stop paying the bills for their children was “when the child completes college or technical school education.” This obviously means the parents believe the children are ready to get a full-time job and start paying their own way. What that answer does not take into account is whether the child is burdened with student loans or whether the parents have paid for the child’s education, which is a significant concern for almost all investors, no matter how wealthy they are.
The third response that garnered at least 10 percent of the nods from investors was “when they are able to pay their own bills” (21 percent), which is to say that children should pay their own bills as soon as they can do so. That is an answer that appears to have no particular time limit to it, and again requires some consideration of whether the child is responsible for the loans they had to take out to pay for their education.
There was little disagreement between those investors with children and those who are planning to have children about when the kids should pay their own way. Investors with children were slightly more likely to think their kids should pay their own expenses as soon as they can, while those investors who do not yet have children were more likely to extend their anticipated support to when their future children complete post-graduate education.
©2019 Spectrem Group
Keywords: family, parents, parenting, investors, advisors, Spectrem, adulthood, graduation, job, employment