Parents are cutting the financial cord with their adult kids later than ever. They hope it isn’t awkward.
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The parents have been paying the monthly phone bill and covering rent for far longer than in prior generations. Some are helping their children with down payments to buy homes. Others are putting a roof over their kids’ heads well into their 20s and 30s to help them save because they can’t cover rising costs of living.
That comes with a price tag. More than a quarter of parents who are helping their children financially said it caused them to postpone retirement, according to a recent Credit Karma survey . More than half had to cut back on living expenses and about a third took on debt.
Feeling stretched, they are negotiating the terms of separation.
Nancy Clark and her then-28-year-old son, Reid Clark, had just sat down to dinner in June 2022 when the conversation turned to when he would move out. The topic had come up before, but this time they decided to set a date one year later.
Nancy, now 60, said she remembers thinking: “I know that becoming financially independent needs to feel a little painful.”
Reid set off on his own last June. He ditched a job managing his family’s three ice cream shops in New Hampshire for a gig as the assistant to a professional ice hockey team’s mascot in St. Paul, Minn. He also works at an M&M’s store.
Nancy bought him groceries when he moved in and occasionally gives $50. By this June, Reid will no longer get any financial help if he’s short. He hasn’t needed to hit up his mum for rent money in the past few months. “I want to chart my own path in life,” he said.
Taking such a gradual approach and framing the conversation around gaining financial independence give it a positive spin, said Rocky Fittizzi , a wealth strategies adviser at Bank of America Private Bank. Telling your children you’re cutting them off suggests it is a punishment.
Many adult children are living at home, or moving back in, to save money. The cost of food and rent have jumped, and more college graduates are saddled with student debt. The share of 25-to-29 year-olds with student loans rose to 43% in 2022 from 28% in 1992. The rise was even bigger for those between 30 and 34, according to a recent report by the Pew Research Center.
Some 20% of men and 12% of women between 25 and 34 years old lived at home last year, far higher than two decades ago, according to Census Bureau data.
During the pandemic, layoffs and money strains forced some adult children and their parents to live together and share finances, said Arne Boudewyn at Insights Squared Consulting Group, a family wealth consulting company.
Worries over losing the close bonds forged during those years may add to the stress of ending monetary help, financial advisers said.
“Letting go is often harder for parents these days because we need to feel needed as much as we want to feel wanted,” said Bobbi Rebell , the founder of Financial Wellness Strategies, which gives workshops for parents about how to teach their children to be financially responsible.
Pam Lucina still remembers the day about 30 years ago when her father told her she was off the payroll. She was in her first year of law school. Her parents had paid for her undergraduate education. Because she assumed they would pay for law school too, she had chosen a pricey school.
She graduated with $40,000 in student debt and couldn’t afford to contribute to her 401(k) for about five years.
“I know that my parents sacrificed to give me what they did and I’m grateful for all of their past support but I wish I had been more prepared,” said Lucina, 52, now an executive vice president at Northern Trust .
Lucina said the experience was a main reason she became a financial adviser. She has three daughters, and recently asked the oldest to complete her own college financial-aid form.
She tells clients that even if they have good intentions when cutting off their kids, it can feel to the children as if their parents are withholding money to punish them.
“Assure them that love is not contingent on finances,” she said.
There are times when financial help is necessary. With a health issue or addiction, parents often use a special needs trust, where funds typically go directly to the child’s treatment and recovery. Others may opt to help children temporarily after a layoff.
But financial advisers said parents need to set boundaries.
Ashley Kaufman ’s parents told her she would need to move out of their Manhattan apartment, where she was living rent-free, once she saved $100,000 for a down payment on her own place.
The cybersecurity consultant hit her goal by the time she was 25, but she wasn’t sure she was ready to move out right then. She enjoyed seeing her younger siblings regularly and playing with her family’s dog named Waffles, she said. Her parents encouraged her to go to some open houses anyway.
Kaufman, who is the stepdaughter of Rebell from Financial Wellness Strategies, is now 27. She bought her apartment around two years ago. She’s happy to be building equity in her place.
“I’m glad my parents gave me a little nudge,” she said.
—Julia Carpenter contributed to this article .
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AI-powered travel agents are challenging online booking platforms, but Airbnb’s exclusive listings and direct customer relationships could give it an edge. Its next challenge: turning repeat guests into loyal customers through stronger rewards and innovation.
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AI agents like Muse can already find you the cheapest hotel room in Paris. But they can’t locate a cheaper version of that Catskills cabin you’ve been eyeing, because it might only be available on Airbnb ABNB -1.43%decrease.
Investors should pay attention to that distinction. When Meta Platforms META 3.38%increase launched its Muse agent last month, travel stocks including Booking Holdings BKNG -1.19%decrease, Expedia and Airbnb all fell sharply.
Airbnb, though, has a real chance to emerge as a winner from the upheaval. The catch: Its stock already reflects above-industry growth. To justify its valuation, Airbnb will need to turn repeat customers into loyal ones.
Online travel companies make much of their money by simplifying search and collecting fees on bookings. AI agents threaten that model.
But not all travel marketplaces are equally exposed. Booking and Expedia largely sell hotel rooms that travelers can also book directly or through competing sites. If an agent can find the same room elsewhere, it has little reason to favor either Booking or Expedia.
Booking and Expedia also sell sponsored listings that steer travelers toward particular properties. Wells Fargo estimates those will account for about 8% of Expedia’s revenue and a much higher percentage of profit next year.
Airbnb has more ways to adapt. More than half its listings are available only on its platform, and more than 90% of its traffic comes directly to its app or website.
The customer relationship doesn’t end after booking, either. Bernstein analyst Richard Clarke notes that 90% of Airbnb guests go on to message their hosts about arrival times, keys or local taxes, giving Airbnb a connection to both sides of the transaction.
How the companies have responded to the possible agentic future is telling.
Expedia quickly signed on as a Muse partner. Airbnb hasn’t, and Chief Executive Brian Chesky says AI chatbots have so far been a boon, sending customers to Airbnb’s website.
Chatbots might work for buying paper towels, he quipped at a Skift conference last month, but people enjoy planning trips. He argued that browsing dozens of homes isn’t something a text-based chatbot is well suited for.
Still, the AI jitters arrived just as Airbnb was persuading investors it deserved its pricey multiple. For years after its 2020 initial public offering, the stock—which trades around 25 to 30 times forward earnings—went nowhere. Investors saw a mature operator trading at a growth premium.
This year, Airbnb growth seems to be accelerating. The stock jumped in August after the company raised its full-year revenue-growth guidance with its second-quarter results. Wells Fargo analyst Ken Gawrelski credits a run of product improvements under a revamped leadership team.
Among the changes: letting guests reserve now and pay later, adding hotels, and a redesigned home page and app. Investors were also betting on what comes next, including thousands more hotels, car rentals and, eventually, advertising.
The irony is that some of those growth drivers push Airbnb closer to the kind of business Booking and Expedia run—the kind of business AI agents could threaten. Even if AI agents capture a large share of travel planning and booking, Airbnb would capture the demand. But it and others would slowly lose control over how customers find and choose properties.
That would undermine the advertising opportunity investors are counting on. The bigger point for Airbnb and other marketplaces is that losing control of customer acquisition could mean surrendering some of their pricing power and margins.
To bulletproof itself, Airbnb might look to another e-commerce giant that has so far kept AI agents at arm’s length: Amazon.
Like Amazon, Airbnb has a loyal customer base and hard-to-match supply. But it has nothing like Prime membership to make customers think twice before taking their business elsewhere.
That is where loyalty comes in. Business travelers stick with Hilton or Marriott because enough nights earn them perks. Leisure travelers rarely accumulate stays with one chain. Airbnb has millions of listings and plenty of repeat customers, but no broad rewards program. It has begun experimenting with credits on hotel stays, but it should make loyalty a priority, not just a promotion.
Airbnb also plans to launch its own AI agent next year. But travelers using an agent might still want it to search Airbnb, Vrbo, Booking and hotel websites alike, rather than limit itself to one company’s inventory.
Eventually, Airbnb might have to strike deals with agent makers, using its unique homes as leverage to negotiate favorable terms, says Gawrelski. Such deals, along with rewards for loyal guests, could over the long term eat into the company’s roughly 13% take rate, he adds. But if they bring in enough additional bookings, the trade-off could be worthwhile.
History offers a reason not to panic. The shift from desktop to mobile unsettled investors in Alphabet and Amazon, but both emerged as major beneficiaries. Companies with valuable assets can come out of a platform shift stronger, if they adapt quickly enough.
Airbnb has homes the bots can’t easily replace. Now it needs to give guests a reason to insist on booking them there.
