Today’s young adults are having a much harder time achieving financial independence than young adults in previous generations, according to a study by Merrill Lynch and Age Wave.
The study, the last of a series examining distinct life stages, surveyed a national sample of more than 2,700 young Americans, age 18 to 34, about the financial challenges they face, and the results are somewhat disturbing.
Although today’s young adults are better educated and more diverse with access to the latest technology and more freedom to determine their future, eight in ten respondents said they are having a more difficult time becoming financially independent than their parents and earlier generations, and 70% of their parents agree.
Financial Support From Parents
That’s not surprising since 70% of young adults — they’re referred to as “early adults” in the study — reported receiving financial support from their parents in the last year, to pay for such expenses as cell phone bills, rent or mortgages and student loans. Fifty-eight percent said they could not afford their current lifestyles if not for their parents’ support.
Parents are spending $500 billion on their early adult children, an “enormous amount,” according to the study. Most of the assistance consists of regular or occasional payments to help with everyday expenses; only one-quarter is for educational expenses. Roughly 25% of young adults live in their parents’ home for a time.
“Financial support [from the family bank] beyond age 25 has become the norm,” according to the study.
Probably as a result of that support, 75% of study respondents defined adulthood as achieving financial independence from their parents.
The Growing Debt Burden
Crushing student debt — averaging close to $37,000 for young adults, according to the study — is a major reason young adults are having such a difficult time becoming financially independent. They will be paying on average $371 a month for 10 years to service that debt.
They are experiencing a “challenging conundrum,” says Ken Dychtwald, CEO of Age Wave. “The only way to make a good salary and support a family is to go to college, but the costs of college pose a serious challenge.”