I’m sure you’ve already heard the big news out of Buckingham Palace — Prince Harry and Meghan Markle, the Duchess of Sussex, have chosen to remove themselves from their royal duties, which has, in turn, likely cut them off from their royal allowance. This move represents a considerable pay cut for the couple, to the tune of $4 million a year.
Instead of continuing multiple royal allowances, these royal rebels want an opportunity to make their own professional wage. Of course, they have little worry of impoverishment since the couple is currently worth about $30 million combined. Harry and Meghan have officially left the payroll.
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I wrote an article in 2018 called "Kids on the Payroll: The Biggest Retirement Problem No One Talks About." This issue is huge for American retirees, their happiness and their financial stability.
When I created the piece, I never imagined that two of the most famous royals on the planet would give up their family obligations — and a massive annual income. Wouldn’t it be nice if all of our kids wanted off the payroll? I say kudos to them!
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Back in the real world, I want all the parents out there to listen up.
In my new money and happiness survey of almost 2,000 retirees across the country, the data revealed that more than 40% are providing their adult children with some level of financial support. That’s nearly half of all of my survey participants!
Now, this figure doesn’t mean helping support children with special needs, or the occasional gift of Disneyland tickets and extra cash in the Christmas card.
What we’re talking about are the cases where retirees are subsidizing the everyday life of their adult kids. These expenses fall into the categories of payment for private school tuitions, cars, housing, credit card and other debt, etc. They pay these expenses because their grown children can’t afford the lifestyle they’ve chosen for themselves.
I don’t at all believe that my group is alone in their well-intentioned generosity. And there’s even more data to support my assumption.
Recently, a study by CreditCards.com painted a similar picture. Their research findings suggest that nearly 75% of parents offer some financial support for children over the age of 18. The study cites expenses like cellphone bills (39%), transportation (36%) and student loans (20%). The data showed that respondents over the age of 55 were increasingly likely to help out with debt payments, as opposed to merely subsidizing necessary living expenses.
The baby boomer population I surveyed said they were, in essence, bankrolling late-20-, 30- and even 40-somethings.
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Our issue here isn't just the "failure-to-launch syndrome" or adult children living beyond their means and becoming dependent on mom and dad. There's a correlation between providing this type of financial support and happiness during retirement. During my survey, the most unhappy retirees overwhelmingly responded that they still support their adult children.
In dollars and cents, the unhappiest retired couples averaged over $700 per month in support of their kids, while the happiest of the lot kept the monthly allowance under $500. At the extreme end of the spectrum, a couple giving over $2,000 per month in support was over 400% more likely to be unhappy than a family with financially independent children.
The ability to be generous is one of the retirement season’s greatest joys. But what starts as generosity could take an unfortunate turn. Let the data be a lesson — there are limits to the happiness that your generosity will bring, and there is a tipping point where it turns into outright unhappiness.
If you’re in the thick of bankrolling your kids’ lifestyles, it can be tough to get out. There’s no one right approach to tightening your boundaries and your pocketbooks. Every parent-child dynamic is complicated to some degree, no matter our age. Plus, there are different circumstances and financial situations that add to the mix.
Let’s not forget about the emotional piece — there are competing interests that underlie the entire setup. On the one hand, parents have an instinct to continue to support and nurture their children. On the other is a sense of shame for enabling their adult kids to continue to spend beyond their means. It doesn’t help that discussing financial assistance for grown children is one of the more difficult areas to find agreement between couples during retirement planning conversations.
Our bottom line is this: The data shows that kicking kids off the payroll, or at least giving them a pay cut, boosts happiness in retirement. Believe me, I get it. As a dad of four young kids, I want to protect them, help them and give them every opportunity to succeed. But I have to count the cost of this support once they're older. It's not just dollars and cents; it's the happiness of my wife and me at stake, too.
I know this can be a sensitive and emotional financial topic, so I’d love to hear your thoughts and stories. Send them to me at hello@wesmoss.com.
Wes Moss has been the host of “Money Matters” on News 95.5 and AM 750 WSB in Atlanta for more than seven years now, and he does a live show from 9-11 a.m. Sundays. He is the chief investment strategist for Atlanta-based Capital Investment Advisors. For more information, go to wesmoss.com.
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