Financial independence can last years after college graduation
More than 4 million New college graduates will be heading out into the world this month, but it could be years before they earn their own living.
Most people feel like adults by age 18—and especially when they have a college degree—but many young adults don’t become financially independent until well into their 20s.
While older generations are more likely to think their children should be fully financially independent by age 21, young adults say it’s a good age to start paying for some of their own expenses, like card bills and travel expenses — though you believe that coverage for health insurance, student loan bills, or rent should come later, so a Bankrate.com report.
More from Personal Finance:
Young investors sell stocks and use their pension plans for emergencies
How much emergency savings you really need
3 financial risk areas consumers should keep an eye on
“There’s definitely a gap between parents and adult children,” said Ted Rossman, senior industry analyst at Bankrate.
Young adults face financial challenges
Some are Millennials and Generation Z Financial Challenges Their Parents Failed to Overcome as Young Adults: Aside from having higher student loan balances, their wages are lower than what their parents made when they were in their 20s and 30s.
Inflation has made life even harder for those seeking financial independence. Rising food and housing costs present additional hurdles for young adults just starting out.
According to this, 68% of parents with children over the age of 18 now make a financial sacrifice to support them Bankrate report.
Parents sacrifice their own financial health
From grocery shopping to paying for cellphone bills to health and car insurance, parents spend an average of more than $1,400 a month to help their adult children make ends meet Report by Savings.com found.
However, supporting adult children can be a significant burden for parents when their own financial security is at risk.
Paying those bills “can also jeopardize your own retirement and other financial goals. You can borrow for a lot of things, but retirement isn’t one of them,” Rossman said.
About half of parents with adult children said support had come at the expense of their own emergency savings or ability to pay off debt, while slightly fewer said support for their children had been detrimental to their retirement savings, Bankrate found firmly.
Children need to realize that the reward is that they are expected to take care of their parents.
President of MaxiFi
“It’s hard to know exactly where to draw that line,” Rossman said. Make sure the help works within your budget and be clear about the parameters – at least discuss them, he advised. “It might be helpful to include a specific dollar amount or time frame.”
“Everyone is each other’s lifeboat when it comes to hitting an iceberg,” says Laurence Kotlikoff, an economics professor at Boston University and president of a financial planning software company MaxiFirecently told CNBC.
However, “it has to go both ways,” Kotlikoff said. “Parents provide a lot of support, and children need to realize that in return, they are expected to take care of their parents.”
An open dialogue can be helpful, he added. “Once this dialogue gets going, it can continue for the next 40 years.”
https://www.cnbc.com/2023/05/19/financial-independence-may-take-years-after-college-graduation.html Financial independence can last years after college graduation