Millennials living at home are draining their parents' bank accounts: study
University of Alberta sociologist finds parents’ financial assets and savings were reduced by nearly one quarter in the years when their adult children lived at home.
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Add Baby Boomers’ retirement plans to the list of things millennials are ruining.
A new study by a University of Alberta sociologist found parents’ financial assets and savings were reduced by nearly one quarter in the years when their adult children lived at home, compared with when they lived on their own.
“If you don’t necessarily have that much money to begin with, then I would say that’s likely increasing struggles, and also potentially decreasing the amount of money you could save for retirement later on and those important things,” said Michelle Maroto, an assistant professor in the U of A’s department of sociology.
Maroto said she was inspired to do the research after seeing many studies focused on young adults and their struggles with increasing economic insecurity, lower wages and fewer available jobs.
She was interested in finding out more broadly how those struggles relate to their parents.
Maroto used longitudinal data that compares the same person over 28 years to see how their wealth changes when their children are living at home. She found parents held 24 per cent less in financial assets, and 23 per cent less in savings, when their adult children lived at home.
For families with $3,200 in savings, that would work out to about a $735 decrease.
“We know struggling today means that young adults are relying on their parents for more support, particularly in terms of housing,” Maroto said.
“This is a situation that’s likely beneficial to the millennial, helping them out in times of financial hardship. But the question is, what does that mean for parents, particularly in terms of their ability to actually accumulate wealth and build their assets?”
The number of adult children living with their parents has increased steadily since the 1980s, she said. According to 2016 census data, about 35 per cent of young adults between age 20 and 34 were living with their parents.
Maroto attributes that partly to economic factors but also to changes in societal norms.
She said millennials have less of an expectation to start a family early, get married and have children, and many are staying in school longer to get graduate and undergraduate degrees, and relying on their parents for support through the process.
Whether millennials will grow up and be able to give their children the same support depends on how things change with policies and the labour market, Maroto said.
“Things could get worse or things could get better,” she said. “We could see a turnaround with better jobs, better wages, that could help people out later on.”
Maroto used survey data that followed American adults, mostly born in the 1950s and 60s, for a period of 16 years from 1994 to 2012. It looked at the changes in their finances through that period, when their kids would have been age 18 to 34.
The data was based on the U.S. National Longitudinal Survey of Youth 1979, which the U.S. Labour department uses to gather statistical information about the labour market.
She said she has done similar research using cross-sectional Canadian data from the Survey of Financial Security that indicates these trends likely hold for Canada as well.