The Financial Journey of Modern Parenting: Joy, Complexity and Sacrifice
Parenting is among the most profoundly fulfilling and constantly challenging shared human experiences. For most, it is a life-changing, identity-shifting, unpredictable and expensive journey. The financial journey of parenting can be complex and demanding. Parents who traverse the journey well-informed, anticipating the practical and financial twists and turns, can make the experience even more rewarding for themselves and their children.
The Many Faces of Parents
- Intergenerational households
- LGBT parents
- Parents of children with special needs
Today, there are 173 million parents in the US. There are 76 million parents with children under the age of 18. This study uniquely looks at parenting throughout one’s entire lifetime of being a parent — from birth through adulthood.
The Modern Parenting Equation
This identity-shifting time in one’s life, comes with many rewards, personal, emotional and practical. 93% of parents describe parenting as the most rewarding aspect of their lives, and 92% say their best memories are with their children.
Today, 73% of people factor finances into their decision to become a parent. In the 1980s, only one-third of people took finances into consideration when starting a family. However, parenting is truly a lifelong financial commitment. A record number of early adults, 31%, live with their parents.
Becoming a parent is perhaps the most transformative life event of all. More people are transformed by the role of parenting (76%) than by marriage (58%), divorce (49%), becoming a grandparent (40%) or retiring (38%).
The Financial Journey of Parenting
There are many rewards that parents experience. With rewards, there are also financial challenges and trade-offs. 58% of parents experience stress about their finances. 63% report having sacrificed their financial security. 72% of parents say they have put their children’s interests ahead of their own for retirement. But 94% of parents say that while parenting is expensive, it is worth every penny.
Even in this era of increasing gender equality, traditional parenting roles still persist. After having a child, women are more likely to take leave, switch to a job with greater flexibility and work from home. Men, on the other hand, make career-enhancing changes such as finding a job with better pay or benefits or working more hours.
Each year, parents spend 2x as much on adult children than they contribute to their retirement accounts, $500 billion and $250 billion respectively. Nine in 10 parents are surprised by how much money they spent after becoming a parent.
The family bank may be overdrawn. 82% of parents are willing to make a financial sacrifice for adult children. In doing so, parents may be sacrificing their own financial security and nest eggs — increasing the likelihood they’ll become financially reliant on their children down the road.
Educating Children about Money
Parenting sparks major financial reassessments as they balance new costs of parenting with their own lifestyles and financial goals. Parenting also triggers more proactive investing behaviors. Parents recognize they need and want help with financial parenting. The study revealed a significant disconnect between what parents think they are teaching their children about finances and what teenage children report learning.
Parents need to pay close attention to financial matters and plan from the very start of the parenting journey. Above all, it’s important to take a holistic approach to financial planning — one that guarantees financial security for both your child and yourself.
This research was conducted by Bank of America Merrill Lynch in partnership with Age Wave and executed by Kantar TNS. The sample includes more than 2,500 respondents in the US who are age 18+, and who are parents — biological, adopted or step — to children of any age, including those under and over age 18. An additional survey of 500+ teenagers was fielded for comparison data.