The Bank of Mom and Dad: How Parental Support is Shaping the Economy

When people talk about the “Bank of Mom and Dad,” it’s usually said with a laugh. But the truth is, parents are now one of the most significant financial institutions in America. In fact, in 2019, American parents ranked as the seventh largest mortgage lender, funding over $47 billion in home purchases. Whether it’s covering a down payment, co-signing a loan, or paying bills outright, parents have become the safety net for many of today’s adult children.

On average, parents contribute nearly $1,500 per month to support their adult children’s living expenses. Millennials, even well into their 30s, are still receiving almost $900 a month. While this support can open doors to homeownership or help cover rising costs, it also raises questions about financial independence, retirement security, and long-term economic consequences.

Here’s the bigger issue: many parents are putting their children’s financial needs above their own. More than half of young adults between 18 and 29 live at home, and many parents are dipping into retirement accounts to help cover costs. Over 77% of parents offering support also attach conditions, whether tied to behavior, budgeting, or financial goals. But the fact remains these sacrifices often come at the expense of parents’ retirement security.

For young adults without this safety net, the situation is even tougher. Roughly half of those over 18 don’t receive any financial support from parents, meaning they often rely on high-interest debt just to cover basic needs like housing or transportation. Without backup funds, they’re less able to take career risks like moving for a job or starting a business that could improve long-term financial stability.

Another growing trend is the use of reverse mortgages. Elderly homeowners are tapping into home equity to help children financially, essentially providing an “early inheritance.” Banks are even developing specialized planning teams to support this demand. While reverse mortgages can unlock short-term cash, they also chip away at long-term financial security for retirees.

The long-term consequences of financial dependency are sobering. Parents may find themselves unable to retire comfortably after years of financial sacrifice. Children may grow reliant on parental support, delaying their financial maturity. For some, the expectation of ongoing help even influences major life decisions, such as postponing marriage or starting a family until they feel financially secure.

Ultimately, the rise of the Bank of Mom and Dad highlights a much bigger problem: systemic barriers to financial independence. Housing costs, student debt, and stagnant wages have created conditions where young adults struggle to build stability without outside help. If we want to change this cycle, we need systemic reforms policies that make housing more affordable, education more accessible, and wages better aligned with living costs.

The Bank of Mom and Dad isn’t going away anytime soon. But without changes that give young people the tools to succeed independently, we risk creating generations who can’t stand on their own financially and parents who jeopardize their retirement security in the process.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.