Young adults are taking longer to reach ‘key life milestones’ impacting finances later, analysis shows

Young adults in the United States are taking longer to reach “key life milestones,” including financial independence from parents and living on their own, compared to four decades ago, according to a Pew Research Center analysis released on Tuesday.

In 2021, adults who were 21 were less likely to have a full-time job; be financially independent, living on their own or married; or have children than their predecessors from 1980.

Today’s young adults are closer to full-time employment and financial independence by age 25, the analysis of Census Bureau data shows. Financial independence is defined as having a single income of at least 150% of the poverty level.

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In 2021, some 39% of 21-year-olds were working full-time, compared to nearly two-thirds in 1980. And only one-quarter were financially independent of their parents, versus more than 40% in 1980, the analysis found.

There are a couple of reasons for differences between each group, including higher college enrollment over the past 40 years, said Ted Rossman, senior industry analyst at Bankrate. Today, nearly half of 21-year-olds are in college, while only 31% were enrolled in 1980, according to the Pew Research report.

Today’s cohort may also face other challenges.

“I would argue that young adults now are facing much higher costs for housing,” buying a car, food and gas, Rossman said. “So, I think there’s a strong inflation component.”

Still, older generations are more likely to think their children should be completely financially independent by age 21, according to an April report from Bankrate.

While many parents are eager to help their offspring, it can come at a high cost. More than two-thirds of parents have made or are currently making financial sacrifices — such as not saving more for retirement or their emergency fund, or paying down debt — to assist their adult children, the Bankrate report found. 

“A big theme of our survey was this idea that you need to put your oxygen mask on before helping others,” Rossman said.  

It’s important to “examine your own situation” before offering to help adult children, said Paul Golden, managing director of the National Endowment for Financial Education.

And if you decide to assist, you need to make a plan with a time limit.

“Before giving your child a loan or allowing him or her to move back into your house, work together to decide exactly how long the situation will last,” he suggested.  

Golden added that “one of the best ways to help your adult children live a healthy financial lifestyle is by demonstrating the behavior you’d like them to emulate.”