Are College Millennials Responsible with Their Parents’ Money?

Ninety-one percent of millennials say yes, but the data tell a different story.

Do college students spend their parents’ money responsibly? It depends on whom you ask: the students, or the parents.

In a survey of 1,000 millennials who received recreational funds from their parents while in college, OppU found conflicting opinions about what constitutes responsible spending. Forty-five percent of millennials who received spending money from their parents said they spent the money “very responsibly.” When asked whether their parents would agree, only 18 percent said that they would.

Should Parents Give their Kids Spending Money in College?

College is expensive. In the past 30 years, tuition has increased 129 percent and now averages approximately $35,000 for one year at a private school. For some parents, any additional cost might not be in their budget, but for others, providing their college-bound kids with spending money might seem like an important contribution to their educational experience.

Parents who choose to give their kids money in school often have different reasons for doing so. Some might want them to spend more time on homework rather than working a campus job. Others might want their kids to enjoy college and get to real-world concerns later. Whatever the reason, deciding to provide students with recreational funds will inevitably raise a number of questions for parents. How much? For what? Will it help?

To explore how millennials use the money they receive, we polled 1,000 18- to 34-year-olds whose parents gave them spending money in college. The results uncovered details about how much millennials receive, how they spend it, and whether their parents know what they’re spending it on.

Who Gets Money from their Parents?

Overall, our survey found that the stereotype of lazy, spoiled millennials mooching off their parents largely didn’t hold up. In fact, the majority of millennials who receive recreational money from their parents work campus and summer jobs, contribute to their education, and take out student loans to finance their degrees.

  • 74 percent of respondents worked while taking classes, with 44 percent reporting employment every year they were in school.
  • 86 percent worked either full- or part-time jobs over the summer.
  • 74 percent contributed monetarily to their education.
  • 65 percent needed student loans to finance their degree.
  • 54 percent earned at least half of the money they spent recreationally while in school.

While there was a large degree of variation in how much money millennials received, the majority (67 percent) received $2,000 or less annually.

How Do College Millennials Spend Recreational Money from their Parents?

Some of the millennials we polled said they primarily spent their parents’ money on partying. However, this response was relatively rare — only 15 percent of respondents said that’s how they used the funds. Far more common were relatively innocent purchases that might not contribute to a student’s education, but likely made school a bit more enjoyable. Respondents reported the following expenses as primary uses of their parents’ money.

  • Eating out (76 percent)
  • Clothes (59 percent)
  • Drink/snacks (53 percent)
  • Electronics (24 percent)
  • Trips (17 percent)
  • Movies/DVDs (16 percent)
  • Partying (15 percent)
  • Video games (15 percent)
  • Music (14 percent)
  • Other (8 percent)

Do Parents Know How Their Money Is Being Spent?

According to the survey responses, most parents have a system in place to keep track of how their money is being spent. In some cases, millennials said their parents reviewed their purchases by looking at credit card or bank statements. However, some parents took a less formal approach and instead favored conversations with their kids.

  • 43 percent of millennials said their parents regularly reviewed their spending through credit card and bank account statements.
  • 12 percent said their parents regularly reviewed spending through another process they had in place.
  • 28 percent said their parents sometimes asked about their spending and they openly answered their questions.

While many millennials reported parental oversight, a significant percentage reported a lack of transparency in their conversations.

  • 7 percent said they responded “selectively” when their parents asked them about spending.
  • 34 percent said they had lied to their parents about how they spent their money.
  • 12 percent said they hadn’t lied, but only because their parents hadn’t asked them about what they were using the money for.

Only 10 percent of millennials said their parents never reviewed their spending.

Does Recreational Money Help a Student Do Better in School?

Aside from a family’s budget, one of the most important considerations for many parents interested in providing their kids with money is whether it will help them do better in school. Our survey found that millennials overwhelming reported that recreational funds from their parents contributed to their academic success.

  • Overall, 70 percent of millennials said that the recreational funds that they received from their parents helped them succeed academically.
  • 48 percent of millennials said the money had a “critical” or “significant” impact on their performance.
  • 22 percent said it made a difference, but a small one.

The percentage of millennials who said receiving recreational funds from their parents did not produce academic benefit was much smaller.

  • 29 percent said receiving the money was nice, but it didn’t make a difference.
  • One percent said it made them do worse.

In addition to academic benefits, 85 percent of millennials said that receiving recreational money from their parents helped them develop personal finance skills. Financial literacy is important. This is especially when the majority of college students make serious financial mistakes soon after finishing school.

Why Do Parents and College Millennials View “Responsible” Spending Differently?

Our survey found that college millennials primarily use their parents’ money for three categories of expense: eating out, purchasing clothes, and buying drinks and snacks. To many millennials, these purchases were an example of responsible spending, but a significant percentage noted that their parents might have a different opinion.

  • 91 percent of millennials described their spending as responsible, but only 61 percent said their parents would agree.
  • 45 percent said they spent their parents’ money “very responsibly,” but only 18 percent of respondents said their parents would say the same.
  • Only 1 percent of millennials said they spent their parent’s money “not responsibly at all,” but 21 percent said their parents would describe it that way.

What explains the conflicting perspectives? Generational differences (likely influenced by an income gap between millennials and baby boomers) may play a key role. But whatever the cause, parents clearly have a more rigid idea of how their money should be spent, and it’s not hard to imagine how this would affect their view of a student’s spending.

For students, what parents may view as luxuries could be considered essentials. Many millennials in our survey said they were spending on social activities such as eating out, trips, and movies. And as a generation, millennials are known for fervently investing in self-care, with a reported 94 percent making personal improvement commitments.

There might be good reason that young people are making these spending decisions. Academic pressure and financial burden are two of six factors that research has implicated as contributing to an ongoing mental health crisis. Therefore, indulging in activities that lower stress may boost a students’ general well-being and ultimately help them better manage their academic work load.

From the other perspective, if purchases that don’t directly contribute to educational costs are deemed unnecessary, then it’s easy to see how parents might view millennials as entitled, reckless spenders focused on instant gratification. However, while some parents clearly have more rigid ideas about how the recreational money they give their kids should be spent, it may console them to know that millennials aren’t as reckless as they may think. In fact, employed millennials have been found to have better financial habits than their elders.

State Analysis

We analyzed responses from five states (Illinois, Texas, California, Florida, and New York) and found a range of regional differences in the financial relationships that millennials have with their parents.

Illinois

Millennials in Illinois were less likely to avoid the topic of spending with their parents, but more likely to lie about it. To some degree, this makes sense. If Illinois parents are more likely to ask about spending, their millennial kids are forced to answer and account for their spending—either honestly or not. Of the five states we analyzed, millennials in Illinois were one of the least likely to describe their spending as “very responsible.” (Illinois was second only to New York in this category.)

  • 44 percent of Illinois millennials say they spend their parents’ money “very responsibly.”
  • 20 percent say their parents would agree.
  • 37 percent say they’ve lied to their parents about spending.
  • 9 percent say they haven’t lied, but only because their parents haven’t asked.

Texas

Texas millennials may have questionable spending habits, but at least they were mostly honest about it. Although least likely to say their parents would view their spending habits as “very responsible,” they were most likely to have transparent conversations about money. Only 30 percent have lied to their parents when asked about their spending habits, in comparison to 37 percent of millennials from Illinois. This discrepancy may be accounted for by an above-average percentage of Texas millennials who avoided the topic of spending with their parents.

  • 46 percent of Texas millennials say they spend their parents’ money “very responsibly.”
  • 14 percent say their parents would agree.
  • 30 percent say they’ve lied to their parents about spending.
  • 13 percent say they haven’t lied, but only because their parents haven’t asked.

California

Of the five states OppLoans analyzed, millennials in California were most likely to say they spend their money “very responsibly.” It’s surprising then that California millennials were also most likely to dodge the topic of spending in conversations with their parents. A full 17 percent successfully avoided conversations compared to five percent of millennials in Florida. If California millennials are representative of the generational difference in attitudes towards money habits, it makes sense that they judged themselves as financially capable, whereas their parents did not agree.

  • 56 percent of California millennials say they spend their parents’ money “very responsibly.”
  • 23 percent say their parents would agree.
  • 35 percent say they’ve lied to their parents about spending.
  • 17 percent say they haven’t lied, but only because their parents haven’t asked.

Florida

Florida millennials are straightforward when it comes to conversations about money with their parents. They are the least likely to lie by omission to their parents about spending. One in two Florida millennials believe they are very responsible with money, coming second only to California in this category.

  • 51 percent of Florida millennials say they spend their parents’ money “very responsibly.”
  • 23 percent say their parents would agree.
  • 35 percent say they’ve lied to their parents about spending.
  • 5 percent say they haven’t lied, but only because their parents haven’t asked.

New York

Our research suggests that New York millennials judge their finances more harshly than they believe their parents would and avoid money conversations altogether. Millennials in New York were the most likely to say their parents would agree with their money habits, with one in four saying their parents would view them as spending “very responsibly.” However, they were also the least likely to say they spend money “very responsibly.” Of those states analyzed, New York came in second with the greatest percentage of millennials who have avoided the money talk.

  • 41 percent of New York millennials say they spend their parents’ money “very responsibly.”
  • 25 percent say their parents would agree.
  • 34 percent say they’ve lied to their parents about spending.
  • 14 percent say they haven’t lied, but only because their parents haven’t asked.

5 Ways That Parents Can Ensure Spending Money is Spent Right

While our survey found evidence that recreational money can improve academic performance, we also discovered that some students use it for purposes contrary to what their parents likely intended. To help those who wish to provide effective financial support, we spoke to Beth Tallman, an expert in millennial finances, who compiled five tips for parents with college-bound kids.

  1. Make expectations clear. Have a conversation detailing the amount of monthly support and what you expect it to cover. Research carefully exactly how meal plans work and what gaps the budget will need to cover. What other services like laundry, internet or transportation will the student need to pay for? Be clear about what you will NOT pay for, and how you will handle any “shortfalls.” If the student has taken out loans for school, now is the best time to help them understand the true “cost” of using these funds for anything other than their education by showing them how much each dollar borrowed will cost to pay back with years of accrued interest.
  2. Set up a joint bank account. For most situations, this can work perfectly well given the technology and services available from banks and credit unions. Parents can easily move money into the student account from another bank account, they can see every debit transaction, and they can set alerts to monitor use and balances. Students should be taught to manage their accounts online and set up alerts as well as learn to avoid costly overdrafts and detect fraudulent use.
  3. Use prepaid cards. There are several systems out there that allow parents to transfer money to a card for their college student to use. These cards don’t help the student build credit, but may be “safer” than the debit card for a joint account: the bank account is not exposed if the debit card is compromised, and the student can’t “overdraft” on these cards. Since these are NOT credit cards, late charges and interest won’t add up. Parents will have to determine which features are most important to them when selecting a card. Do they want to prohibit what it can be used for? How much will it cost to use and reload? Will they want to provide ATM access at no cost? Will they want the ability to pay bills online?
  4. Make the student an authorized user on a parent’s credit card. This is a good idea for emergencies, like a breach of the student’s debit card, or a medical crisis. However, this implies that the parents trust the student’s definition of “emergency” and have an understanding of how they will be reimbursed for any “non-emergency” use of the card.
  5. Use it as a teaching opportunity. Keeping an eye on how the student is spending money and allowing them to make some small mistakes will provide plenty of valuable “teachable” moments during these years. Students will learn how to manage their accounts, pay bills, budget, and deal with things like overdrafts and communicating with the bank or credit card company. They will learn how to be financially responsible….a lesson you can’t put a price tag on.

Methodology

OppLoans contracted the polling company Pollfish to conduct a survey of 1,000 millennials between the ages of 18 and 34 who received recreational funds from their parents while attending college. The survey ran on July 28, 2018. Fifty-five percent of respondents were female and 45 percent were male. Respondents self-reported financial behavior. The survey used a nonprobability sampling method. The sample size was statistically significant.

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Contributors

Beth Tallman

Beth Tallman is a financial educator, freelance writer and consultant. She developed the personal finance curriculum for Oberlin College. She writes on personal finance and financial education, conducts student workshops, and develops educational content. Ms. Tallman is the treasurer of Ohio Jump$tart Coalition and is a regular contributor to NextGen Personal Finance.