Parents who help their unemployed adult children out financially tend to spend less money on food. They work more. And they reduce how much they save for retirement, according to a recently published RAND Corporation study that retirement expert Robert Powell wrote about in a column for TheStreet.com.
Researchers discovered that parents are more likely to give cash to a child once they lose their job and spend less money on food once a child becomes unemployed and maintain this drop in consumption for a two-year period.
“On the individual level, most of the changes were small,” said Kathryn Edwards, an associate economist and lead author of the study. “The problem is what this means in the aggregate. When the labor market risk of one generation is informally insured by another, the older generation may be putting their retirement security at risk, while the younger generation has insurance that depends on how willing and wealthy their parents are. This is a trademark of basic economic inequality.”
Financial planners interviewed by Powell advised parents to set a time limit for long they financially support a child; to not access funds earmarked for retirement; and to offer other forms of support, such as providing free child care so they child can write resumes, go on interviews, or take classes to improve their earning power.