How Old Is Too Old to Ask Your Parents for Money?
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What is the main topic discussed in this episode?
Here's your Money Briefing for Wednesday, January 24th. I'm J.R. Whelan for The Wall Street Journal. We're pivoting topics today to talk about the family bank. A financial gift from your parents could help you buy your first car or make a down payment on a house. But more often than in past years, getting some money from mom and dad is more than a one-time-only occurrence.
How has parental financial support timeline changed from past generations to now?
whereas that help was typically concentrated between the ages of 25 to 35. It's now starting when a child leaves school and then extending well into the grandchild's life.
We'll talk to Wall Street Journal personal finance reporter Julia Carpenter after the break.
It's not unusual for parents to give their children money, but that financial relationship is lasting longer than it did in previous generations. Wall Street Journal personal finance reporter Julia Carpenter joins me. Julia, earlier this month we discussed how to approach the bank of mom and dad.
Why are parents extending financial help beyond ages 25–35?
But why has the family bank been staying open for longer?
Life is more expensive. So whereas in the past parents might gift you $3,000 so you can buy a house, that $3,000 is now just paying your rent. It's not necessarily that parents are gifting larger amounts of money. It's that they are helping their children for longer. I was looking at some data that shows that help was typically concentrated between the ages of 25 to 35 in years past. It's now starting when a child leaves school and then extending well into the grandchild's life.
Oh, wow. And that could be potentially 30s and 40s.
What life events most commonly trigger adult children to ask parents for money?
Even older, 40s and 50s.
Another walk to the bank. What's the most common reason children ask their parents for financial help?
It happens around big life milestones. And it's not necessarily always the children asking. Sometimes the parents take the initiative to gift the money or to lend a helping hand ahead of time. But it's around really expensive events like weddings, buying a house, like I mentioned earlier, recovering from job loss or some other financial emergency. But also we're seeing more and more that people will help once a grandchild comes along, paying for the grandchild's school, paying for daycare, these other things that make that much more expensive.
And all of this is done with good intentions, I'm sure. But what mistakes do parents often make when their children ask them for money?
I spoke with a financial advisor who said that too often she sees parents not consider the financial effects that they will face, sacrificing on behalf of their children or making a mistake and pulling from their retirement or pulling from another bucket of money that's really crucial for the parents and their financial security. Also, though, the same financial advisor mentioned that too often the children accept the money or the parents give the money without thinking about the long-term effects it could have on their relationship. The problem with these financial transfers is that they can lend a transactional nature to the relationship. So I'm thinking about a parent who gives a certain amount of money to their adult child and the implication is, okay, you're going to visit me more, right?
Or as this financial advisor was telling me, you're going to take care of me when I'm old, right?
What mistakes do parents make when giving money to adult children?
I'm giving you this money. I'm sacrificing my current financial security. That means that's now on you and you're responsible for my later financial security.
You know, nobody's perfect. So how about the children? What mistakes are they making?
One of the things children can do is begin to count on that money. Your parents give to you an amount of money every few years once you're out of school, and then one year that money doesn't come. Oh no, you've built your entire budget around receiving that money. What's going to happen then? The other thing that could happen is that they resent it because it feels transactional or because it feels the parents are giving them this money in order to reach certain milestones. This is for you guys to get married. Well, we don't want to get married.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:02–0:27
2
How has parental financial support timeline changed from past generations to now?
0:27–1:16
3
Why are parents extending financial help beyond ages 25–35?
1:16–1:52
4
What life events most commonly trigger adult children to ask parents for money?
1:52–3:26
5
What mistakes do parents make when giving money to adult children?
3:26–4:24
6
How can families set boundaries to avoid transactional relationships around money?
4:24–6:16
7
What tax and loan rules should families know when transferring significant sums?
6:16–6:40
8
How does intergenerational giving affect socioeconomic inequality and cultural views?
6:40–7:51
Speakers
2 identifiedMore from WSJ Your Money Briefing
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