Young adults define success as being financially independent at the same time that a majority are receiving financial help from their parents, according to a survey by Merrill Lynch Wealth Management and Age Wave.
Sixty percent of young adults between ages 18 and 34 define success as being debt free, compared to only 19 percent who say financial success is being rich. This may reflect the fact that young adults are shouldering $1.6 trillion in student debt, according to the study.
In order to make ends meet, a majority are relying on parents for at least some financial assistance. Seventy percent have received financial support from their parents in the last year, and 58 percent said they would not be able to afford their current lifestyles without ongoing parental support, the survey said.
The aggregate amount spent by parents today on their young adult children is more than $500 billion annually, the report said. This is twice what the parental generation is contributing to its retirement accounts, said Ken Dychtwald, psychologist, gerontologist and CEO of Age Wave.
Thirty-one percent of the young adults live with their parents, and a majority of both parents and children said they enjoy the arrangement, the study said.
Merrill Lynch and Age Wave, a research organization focused on issues of aging, surveyed more than 2,700 people for the report, “Early Adulthood: The Pursuit of Financial Independence.”
Eighty percent of young adults said it is harder for them to become financially independent than it was for previous generations, and 70 percent of baby boomers, who are the parents of the young adults, agreed.
In addition to relying on parents, one quarter of the young adults said they had already taken an early withdrawal from a retirement savings account to pay off credit cards or student loans.
“Young adults should realize that by taking money from a retirement account, they are losing the longevity advantage that they have,” said Lisa Margeson, head of retirement client experience and communication at Bank of America.
“Today’s young adults are encountering more complex financial paths than prior generations, forcing them to postpone life milestones and putting their ability to save for retirement at risk,” said Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America.