How providing financial support to your parents impacts wealth-building

In this economy, it’s pretty common for parents (when they can) to give their children — even adult children — financial help. A recent study from the Center for Retirement Research at Boston College, however, looked at money flowing the other way — from children to parents.

It found that about 13% of children give financial support to parents not living with them, although the numbers are higher for Black and especially Hispanic children compared to white children. A quarter of Hispanic people support their parents financially.

According to Andrew Eschtruth, director of the Center for Retirement Research, in general, people who are already better off are more likely to give. On average, it doesn't hurt wealth building in the long term.

“Until you start looking at it by race/ethnicity, and there you find that the Black and Hispanic children who are giving to their parents end up with less wealth than those who do not give to parents,” he said.

Eschtruth said that's because they tend to give to parents starting at younger ages than white children, so they can miss out on opportunities to save, invest, and grow that money over time.

"I think I see it every day,” he said. “I think I've lived it personally."

Gerardo Garcia is co-founder of Confianza Wealth Management in California and said his clients struggle to balance the desire to take care of their families with the goal of saving for their own future.

"I think first-time wealth builders, especially Latino professionals that probably went to school making more money than their family ever did, they're definitely helping their family in one way, shape, or form,” he said.

Garcia added that he encourages clients with the airplane analogy: You have to put on your own mask first before you can help someone else.