(CNN) — For generations, the formula for getting ahead in America seemed straightforward: Go to college, work hard, save your money, buy a home and climb the economic ladder.
Today, that formula increasingly depends on something many Americans can’t control: whether their family has the financial means to help along the way. Without that support, many Americans face mounting debt and an increasingly difficult – if not impossible – path to homeownership and wealth accumulation.
The dependence is especially pronounced among young adults, who are entering an economy that has become less forgiving. Breaking into the job market is tougher than it was just a few years ago; everyday expenses are eating up a larger share of paychecks; student loan debt continues to weigh on borrowers; and would-be homeowners are being pushed to the sidelines as high prices collide with stubborn mortgage rates.
That reality is reshaping the role of family support. Nearly half of adults ages 18 to 29 received assistance from someone they don’t live with to cover recurring expenses over the past year — such as housing, transportation and medical bills — according to the Federal Reserve’s latest Survey of Household Economics and Decisionmaking.
An almost identical share (49%) of people from that cohort also reported living with parents, according to the survey, which was fielded in October. That’s up six percentage points from 2022 and 12 percentage points from 2019.
“I definitely am seeing kids tied to their parents longer,” said Nate Kinzinger, a wealth adviser at Small World Wealth Management, a division of Northwestern Mutual. Part of it is that they’re not earning enough to support themselves, he said. But they’re also not changing their lifestyles to save money. Instead, he said, “they’re asking their parents to give them more.”
Among what he describes as the “moderately affluent” families he advises, Kinzinger said parents often oblige.
Not every family has the financial means to do so.
Giving while living
For parents who can afford it, giving financial assistance to adult children has become a way to help them meet their immediate needs, rather than making their children wait until they pass away to inherit it, said Emily Irwin, a managing director of private wealth planning at Wells Fargo.
“They’re reflecting upon their goals, and they’re saying that they find more joy, fulfillment and purpose in being able to see the impact,” she said.
That philosophy shaped the decision David made after inheriting more than half a million dollars from his parents at the age of 61. David, a retired physical therapist who is now 68, asked that his family’s last name not be used to protect their privacy.
His financial adviser had already assured him that the roughly $750,000 he and his wife had saved for retirement plus the additional $566,000 he inherited was more than enough to support them. So he decided to give $50,000 to both of his children. While his adviser encouraged him to put himself first and keep all the money, he felt that given the simple lifestyle he leads, if he couldn’t get by without the extra $100,000, he was doing something wrong.
He gave them the money on Christmas Day 2019, tucked inside cards alongside a letter and deposit slips.
“Grammie and Papa worked hard and were frugal. They lived the American dream,” he wrote. “Despite being the children of a machinist and housewife; and a road crew supervisor and librarian, they were the first generation of their families to leave to their children an inheritance of more than a million dollars.”
“Yes, unbeknownst to us Grammie and Papa were millionaires.”
David’s son, Phillip, 37, felt the gift was motivated by guilt over the amount of debt he took on to graduate college. David rejected that explanation, saying his decision was driven by his own financial stability and the belief that the money would have a greater impact on his children if they received it earlier in life.
Phillip ended up using the money to pay off his private student loans and put the rest toward a down payment on a home with his wife.
“I am obviously grateful to my grandparents and my parents for the gift they gave me and my wife, but socially I feel a certain level of guilt around it,” he said. “My wife and I make a comfortable living, but without the money, we likely never would have been able to save up for a down payment on a house in the area we live in,” he said.
The home they purchased in July 2020 for $359,000 was assessed at $553,000 just two years later, an illustration of how quickly access to homeownership can translate into wealth accumulation. Nationally, the median new home sales price increased 32% to over $430,000 during that time period, according to Census Bureau data. “Our house is a perfect microcosm of why inheritance has become almost a necessity to become homeowners now,” Phillip said.
Phillip’s sister, Chelsea, used her inheritance differently. She paid off all her student loans and put the remainder in retirement investment accounts.
“It really has allowed me to build a pretty strong support net for myself,” Chelsea, 40, told CNN. “I’m certainly grateful to have benefited from that generational pass-down.”
When parents say no
Nick, a 36-year-old who works in environmental compliance, has the polar opposite experience. He similarly asked that he not be identified by his full name in order to protect his family’s privacy.
In 2012, his parents took out an $85,000 loan to purchase a home in full for his sister, who was single at the time.
Four years later, when he was looking to purchase his own home, prices had surged and his parents said they could no longer afford to do the same. They didn’t offer him any money toward buying a home either, he said.
He does, however, live with his parents in a small town north of Nashville and contributes toward living expenses. But, despite saving money and landing a job that pays more than $80,000 a year, he hasn’t come close to the amount he would need for a down payment and other costs of buying a home.
Saddled with “an ungodly amount of student loans,” Nick said he’s focused on saving enough money to move abroad in a country like Spain, where he believes he’d have a much better shot at purchasing a home on his own.
“I finally feel like I’ve gotten a decent job and have a good income. Then inflation and everything else kicks in, and then housing prices continue to run up,” Nick said.
“It’s like, ‘Well, maybe homeownership in America wasn’t meant to be for me.”
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