Millennial parents don’t have enough money to pay for all of their family’s needs, so they’re turning to their parents for financial help.
An FKD Feature exclusive

Millennial parents haven’t had it easy, as they’re raising children as the cost of living continues to surge and wages stay stagnant. In order make ends meet, they’re getting much-needed financial aid from their parents, who tend to be Baby Boomers.

This phenomenon was confirmed by the TD Ameritrade Millennial Parents Survey released this year. That survey found “on average, each millennial parent with a living parent receives approximately $11,011 per year in combined financial support and unpaid labor from their parents, including those who receive zero support.”

The survey pointed out something that many of us already suspect: Grandparents are eager to offer financial support and childcare when millennials have children. This help is sorely needed as raising a child in today’s world easily exceeds a quarter million dollars.

Rich dad, poor son

This should come as no surprise to anyone because Baby Boomers typically have a much higher net worth than their children. Of course, some of this has to do with age, and people tend to grow their nest eggs as they get older.

On the other hand, Baby Boomers didn’t come of age with oppressive student-debt loads, definitely encountered a better job market and had access to cheaper housing and more affordable healthcare and childcare. Boomers had it easier in many ways, and their financial success is now trickling down to their children.

Mommy and daddy’s money is helping big time

TD Ameritrade estimates that more than $250 billion are exchanging hands between these two generations so millennials are able to raise children “without risking their own financial future.”

Interestingly, the survey highlighted that most millennials are “not too proud to accept help from their own parents.” Over time, this intergenerational transfer of wealth could translate into significant financial gains for millennials, as they’re “more likely to stay on-track with their long-term financial goals like retirement and college savings.”

Unearthing the millennial reality

This survey, which polled a 1,000 U.S. millennial parents, also confirmed many of other realities that younger generations face in today’s difficult economic environment. For instance, nearly half of millennials admitted to delaying “parenthood until they were financially secure.” Millennial parents also fessed up that if money weren’t an issue, they would have additional children (in many cases a third child).

These findings wouldn’t shock anyone who’s been following our declining birthrate in the United States. As having large families becomes a luxury that’s limited to the affluent, people are having smaller families, or even having no children at all.

Simply, it’s become too hard for millennials to have as many children as they want. Unless the government makes meaningful contributions in the way of subsidies to would-be parents, birth rates likely will continue to decline.

The cumulative effect of declining birth rates is economically devastating in the long run, as declining demographics lead to less economic growth, and a skewed ratio of workers to retirees.

Luckily, Baby Boomer’s financial contributions are lessening the strain on millennial parents, and helping our nation avoid a demographic downward spiral.

Takeaway: This is the new normal

Baby Boomers subsidizing everyone else is the new normal. Because millennials have had it so difficult and many boomers have more cash on hand, it’s only natural for them to fork over dough to their own offspring.

Baby Boomers giving their kids help while they’re still alive is just the tip of the iceberg. In fact, as Boomers die and pass on their wealth to their children and other family, it will go down as the largest wealth transfer in history. Estimates of the coming intergenerational transfer of wealth  exceed $30 trillion dollars. Consider the U.S. GDP (the largest economy in the world) is $18 trillion.

In today’s world, your parents’ socioeconomic position largely determines your ultimate financial fate. This is a radical departure from notions of a meritocratic America where class mobility is freely accessible to those who work hard. Look for some serious policy debates in coming years as a larger percentage of wealth becomes inherited from previous generations, especially Baby Boomers.

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Header image: Adobe Stock

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Posted 03.06.2017 - 01:12 pm EST