They often ask how soon they can open up their college funding 529 account, and the best way to put money away each month. With each successive government report releasing data on total student loan indebtedness (now nearing $1.5 trillion cumulatively), a silent frenzy permeates these expecting parents’ minds about how best to protect their offspring from financial calamity. We hear about those concerns and the expenses that come with the cost of parenting like diapers, babysitters, private school, clothes, toys, added costs for vacations – the list goes on and on.

Yes, we already knew kids were expensive. That is not a secret. According to an article from Time Magazine, the cost of raising a child through the age of 17 is now $233,610*. The largest expense? Housing – it makes up 29% of that total with food coming in second at 18%.

Want the bad news? The cost of parenting doesn’t stop at age 17. It doesn’t stop once you have saved for college. In fact, according to data from AgeWave, a research group in partnership with Bank of America, it confirmed what I have known by watching my clients for years. The fact is – the most expensive years for our children is between ages 18-34.

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I know you are thinking, “That can’t be.”  Well, it’s true for most in the form of parental assistance. Parents may not fully support their children once they leave the home, but it is very common for parents to lend some support. So, even though you may not foot the bill for all of your adult children’s groceries, you likely pay some, and the same goes for basics like car expenses, vacations and even support on rent. This chart helps describe what the support looks like and how it varies depending on the type of expense:

In fact, the study shows that American parents of adult children spend $500 billion annually on their adult children between 18-34 years old. If you are trying to wrap your head around the size of that figure, just know that the amount used to support adult children is two times the amount contributed to the parents’ retirement accounts! Your reaction should be both “yikes” and “wow!”

Remember when you were just starting your career and sudden expenses arose from a broken appliance, or worn out car part, and you turned to your parents for help? First time adults who aren’t used to living on their own financially become surprised by little big things like the cost for new tires. After all, when you are starting your career, who has an extra $600 for four new tires you never thought you would need? Most kids don’t even realize new tires are ever needed because after all, don’t tires just last forever? When bills come in for broken air conditioners, or sudden medical expenses, it isn’t surprising to learn that concerned parents step in to help their independent offspring. What is surprising is looking at the scope and magnitude of the dollars spent.

I don’t want to minimize the cost of raising children. As I indicated earlier, it’s massively expensive. Yet, as our kids become young adults, the costs of the items they buy start growing exponentially as well. Early in life, a toy truck that costs $10 would do. As an adult, it’s when the brakes need to be replaced on their real truck and they need help paying some of that $800 expense. Little kids need clothes suitable for a child and you can find brands and prices that are reasonable. As a young adult, suddenly jeans are more than $100 per pair, shoes are that or more and the costs multiply for buying so much less than you would get at the kids stores years earlier.

4 Money tips you can’t afford to pass up

To illustrate this point one more way – my son is counting the minutes to when his two-year period ends and he can upgrade his cell phone. These days our children don’t use phones for communication or merely entertaining themselves playing games. Cell phones are critical for school and it’s how he checks his homework assignments and even takes pictures to turn homework in! So, my choice as his parent is one of three:

1. Not upgrade his phone that has been sent back to Verizon several times for unusually low battery life and other assorted issues common to almost two year old phones;
2. Make him upgrade his phone to a lesser phone which may open the door to peer pressure jeers and other phone performance issues (no wonder why studies find that 69% of parents say that they feel they must provide their kids with the same things that their friends have**); or
3. Upgrade his phone to the latest model and endure the $40/month fee and eventual $1,000 cost of an upgraded phone.

Ahhhh! The days when I could get him a plastic toy phone for $4.99 at Wal-Mart…those were the days.

Don’t forget paying for weddings. Ouch! The young adult expenses keep stacking up!

Some say that the half a trillion spent on young adult children each year is like a “hidden economy” of sorts. I often encourage parents to treat funding their young adult children in the same method that is requested when you receive instructions from flight attendants prior to take off when they say “please put your own oxygen mask on first before helping others.” Financially speaking, this means please take care of your own money first before you end up bailing out or endlessly supporting your adult children. Of course, as advisors we understand supporting core needs and urgent expenses. But before you co-sign for your children’s new car, think long and hard about your own personal economic data first before jumping into a shared cost that may slowly drain you for many years to come.

Are you looking for an Arizona wealth management firm to provide personalized investment management? If so, contact the wealth advsiors at Henry+Horne Wealth management.

Michael Calin, AIF®

*http://time.com/money/4629700/child-raising-cost-department-of-agriculture-report/

**https://www.cbsnews.com/news/kids-cost-parents-most-when-theyre-adults/