Bank of America Merrill Lynch

Parents sacrifice retirement savings for children

Parents in the U.S. now spend $500 billion annually on their 18- to 34-year-old adult children—twice the amount they contribute each year to their retirement accounts ($250 billion),1 according to a new Merrill Lynch study conducted in partnership with Age Wave, The Financial Journey of Modern Parenting: Joy, Complexity and Sacrifice. The study also found that nearly two-thirds of parents report having sacrificed their own financial security for the sake of their children.

“Parenting can be one of the most fulfilling and identity-shaping experiences of a person’s life—and with it comes a lifelong financial commitment,” said Lorna Sabbia, head of Retirement & Personal Wealth Solutions for Bank of America Merrill Lynch. “Planning ahead for the major financial costs can limit surprises down the road and help parents safeguard their own financial goals.”

When emotions and money become intertwined, parents risk making financial decisions that can compromise their own financial wellness. The costs of parenting are surprising and steep, with nearly two-thirds reporting they encounter financial difficulties associated with parenting. And the financial challenges extend into adulthood, with parents of adult children reporting they provide some type of financial support, often putting their children’s interests ahead of their own financial needs.

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Takeaways

Download the study to learn more about the findings, including action steps for parents to consider.

Encourage employees to leverage the educational tools and resources available on the Benefits OnLine® Education Center.

Invite a Financial Wellness Specialist or financial advisor to conduct a seminar and/or one-on-one consultations to help employees financially manage parenting expenses.

1 Calculation based on parents’ contributions as reported by their adult children ages 18-34 across 14 expense categories and IRS data on employees’ elective contributions to the full range of retirement accounts.

2 Merrill Lynch / Age Wave, The Financial Journey of Modern Parenting: Joy, Complexity and Sacrifice, 2018.

Methodology: This research is based on a survey fielded in June 2018, conducted by Merrill Lynch in partnership with Age Wave and executed by Kantar TNS utilizing the Kantar Lightspeed panel, along with selected panel participants. The survey includes more than 2,500 respondents in the U.S. who are over age 18 and who are parents—biological, adopted or step—to children of any age, including those under and over 18. An additional survey of 500+ teenagers was fielded by ORC International in June 2018 for comparison data. Some findings are drawn from a similarly structured survey fielded in December 2016 by Kantar TNS via an online data collection methodology. Additionally, two focus groups of parents were conducted in June 2016, where qualitative information was gathered about parents’ emotions, preferences, experiences and needs as they navigate this complex life stage. Age Wave is not affiliated with Bank of America Corporation.