Pandemic puts parents in unusual financial situations to help their kids outlast the virus

Dallas-based parent Joel Williams was delighted that his 25-year-old daughter Natalie graduated two years ago and started an exciting career in social media marketing in Austin. She started a new job in IT sales last year when the world collapsed due to COVID-19.

A sales job in a pandemic was not the place. Nobody answered their calls. Natalie couldn’t network face to face. She was released in June. Then she got the virus herself and couldn’t find a new job. She moved back in with her father in Dallas.

“She felt that at 25 she shouldn’t be living with her father,” said her father. “But that is unprecedented. There are many people her age who are going through the same thing, and she is fortunate enough to have access to me. “

The pandemic was a one-off event that created unique and serious financial problems for adults of all ages, but especially younger ones without established careers or savings accounts.

Nearly 50% of parents with adult children gave money to their children during the pandemic, according to a Creditcards.com survey of 3,925 adults in April 2021. Of those who helped financially, the average amount was $ 4,154.

Ted Rossman, a senior industry analyst at Creditcards.com and Bankrate.com, said consumer finance sites hypothesized that many parents are sponsoring their adult children, and the survey proved them right.

“This is a big deal. Almost half give money to their children, and that has a real impact on them, ”said Rossman.

Almost 80% of those who gave money to their adult children said they could have used that money for something else during the year.

“Young adults have been hit hardest because they are early in their careers and have less savings and high student loan burdens, especially the older millennials,” he said. “They had the double blow of growing up in the financial crisis, graduating from a tough job market, and exactly when they get going, COVID hits.”

“Younger adults, who tended to work in services and other important jobs, made less money over the past year, while older office workers were more likely to work from home,” said Rossman.

While it’s okay to help your children, you need to make sure that you “wear your own oxygen mask” first, Rossman said.

You can also help by letting them move home or watching the grandchildren look for jobs, both of which are cheaper options than giving money, he said. If you are making a financial donation, it should be clearly defined whether it is a gift or whether it is to be repaid, whether it is a one-time payment, or whether it is a recurring payment.

“Times have been tough for a lot of people over the past year and some may not realize that whoever donates is also in trouble,” said Rossman.

Bowman Hallagan, managing director at Bernstein Private Wealth Management in Dallas, said his firm had seen more families over the past year having important financial discussions, such as:

Thanks to baby boomers’ wealth, which is based on stocks and real estate, the US is currently experiencing the largest wealth transfer in history. According to Cerulli Associates, an estimated 45 million households will move more than $ 68 trillion over the next 25 years.

Dallas-Fort Worth-based Benold Financial Planning, which caters to general practitioners and healthcare professionals in Texas, saw large increases in sales and profits last year as more people needed help.

“The pandemic was a great catalyst for these conversations because you had a full house, a trapped audience of people who weren’t going on vacation or visiting friends,” Hallagan said. “So you had a captive audience to have awkward conversations, but you needed conversations from a family perspective.”

Jordan Benold, a certified financial planner at Benold Financial Planning, said he’s also seen more than just parents helping children. He sees clients who help brothers, sisters-in-law, and other family members much more than in years past. The main reason for the financial aid was job loss, he said.

A customer pays the mortgage for his daughter. Another lets his brother stay with him while he gets his GED. Another couple liquidated their brokerage account because their children needed money. Another customer who runs his own business ran out of money and borrowed money from his parents on a loan agreement.

“Financial planning is a little bit of advice and a little bit of financial management and a lot of listening,” said Benold. “During this time, people have opened up more because they have a greater burden.”

Benold’s advice to those helping family members financially is to view the money as a gift so relationships don’t get acidic. For lenders expecting repayment, the terms should be clear from the start. Dallasite Dennis Cali recognized the awkwardness that can occur when close friends or family loan out loans to each other and created the loan app Zirtue to formalize these types of loans.

Joel and Natalie Williams.(Elias Valverde II / employee photographer)

Joel Williams said parents have a responsibility to help their children, whether or not they get repaid, and his time for doing so is drawing to a close. Natalie started working as a broker at Monument Realty in Frisco this week.

Despite not investing as much money in retirement and investing, Williams said it was a pleasure to have Natalie at home. His older daughter is married with kids, and jealous of the extra time he and Natalie have together, Joel said.

“It was fun. Sometimes she asks me about moderate suggestions, like which shoes go with which dress, and she gives me dating tips,” he said. “The plus point is the unusual opportunity to spend time with my daughter to spend that I would normally not get. “

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