Understanding financial support decisions between parents and adult children
The Challenge
How do American families make decisions about financial support to adult children? Despite growing awareness that many parents provide financial assistance to adult children in their 20s and 30s, little is known about how families structure these arrangements or why they choose specific approaches. Understanding these dynamics is critical for financial services companies serving multiple generations.
Research Approach
I designed a qualitative interview study to understand how upper-middle-class families make decisions about financial support for young-adult children. This demographic represents a distinctive customer segment—affluent enough to provide substantial support, but lacking the formal wealth transfer mechanisms (e.g., trusts, family offices) used by the ultra-wealthy.
I conducted separate, confidential interviews with young-adult children and their parents to capture both perspectives on the same financial relationships. My sample included 47 U.S. college graduates (ages 27-33) and 29 of their parents across three ethnoracial groups: native-born White, native-born Black, and immigrant ethnic Chinese families.
Interviews covered parental financial support during and after college, decision-making factors, understandings of adulthood, and family dynamics. I led a team of 21 research assistants in systematic qualitative coding to identify patterns across families.
Key Insights
Insight 1: Independence Dilemmas
The American cultural ideal of financial independence as a marker of successfully becoming an adult creates tensions in families. Even when parents have resources and both generations believe support would be beneficial, parents sometimes withhold financial support, and—defying conventional economic rationality—young adults sometimes avoid or reject it.
Insight 2: Independence Performances
I discovered that families don't simply choose between providing support or prioritizing independence. Instead, they sometimes create financial arrangements that simultaneously deliver support and demonstrate commitment to independence—what I call "independence performances." They took five main forms:
Parent loans: Parents loan money to children (repayment may or may not be required).
Intra-familial transactions: Parents charge children for something valuable, such as housing (i.e., rent) or a car.
Split payments: Parents and children split the cost of an expense.
Work requirements: Parents require children to have a job to receive support.
Planning exercises: Parental support is preceded by a financial planning exercise (e.g., creating a budget).
These arrangements provide a way for adult children to maintain their desired identities as independent, responsible adults while simultaneously enabling parents to support their child’s success and well-being and foster their child’s independence as an adult.
Insight 3: Ethnoracial Variation
Immigrant families and native-born families approached support differently. In native-born families (both Black and White), parents and adult children generally shared the adult child’s financial independence as a goal—the sooner, the better. Both generations valued eventual financial separation, making independence performances a collaborative means of addressing shared tensions.
Immigrant ethnic Chinese families showed different patterns. Parents typically prioritized family wealth-building through resource pooling (avoiding third-party costs such as rent and mortgages). Adult children, however, sometimes sought greater independence than parents expected, valuing autonomy and privacy. This led some adult children to limit their parents’ support, imposing boundaries their parents didn't require.
Insight 4: Adult Children Are Active Agents
Adult children actively shape whether and how they receive support—they're not passive recipients of their parents’ resources. Some initiated their own "independence performances" (proposing to pay rent, converting gifts to loans), while others avoided parental support or rejected offers outright to maintain autonomy.
Applications for Financial Services
1. Multi-generational product design: In the upper-middle class, parents and adult children often have financially intertwined relationships well into their 20s and 30s. Financial products should accommodate multi-generational dynamics, not just individual account holders.
2. Preserving narratives of independence: Even parents who provide support often view financial independence as the ultimate goal, and so do their children. Product features and marketing should frame parental support as an investment in the adult child’s future financial independence while portraying adult children as autonomous, responsible adults.
3. Cultural segmentation: Ideas about independence vary across demographic groups. The goal of financial separation between generations is likely to be less salient for immigrant parents from cultural contexts such as East Asia, where intergenerational financial pooling is the norm, even if their adult children have adopted more individualistic American values. For such groups, financial services should emphasize family wealth-building rather than individualistic independence.