U.S. Parents Charge Kids Interest on Loans. Here's How Much.
Share this @internewscast.com

With young Americans facing steep living expenses and stagnant wages that haven’t kept up with inflation, many turn to loans for financial support.

A Bank of America report from 2024 reveals that nearly 46% of Gen Z individuals aged 18 to 27 rely on help from their families to manage financial strains.

Beyond this, while some parents are willing to offer monetary assistance, these loans often come with conditions—such as interest rates.

A recent study by the financial media company MarketBeat.com, surveying over 3,000 parents, shows a growing trend of parents charging their adult children interest on loans.

“The Bank of Mom and Dad has always been generous, but even generosity has its limits,” explains Matt Paulson, founder of MarketBeat.com. “The notable trend is that although the majority of parents don’t demand repayment—certainly not at standard interest rates—inflation and mounting costs are changing familial financial dynamics.”

According to the data, parents typically charge an interest rate of 5.1%, which remains significantly lower than other sources: the average personal loan rate is 12.49% for borrowers with a 700 FICO score, a $5,000 loan, and a three-year term, as reported by Bankrate.

Only 15% of parents would be comfortable with lending their kids $5,000 or more at one time, according to MarketBeat’s research.

Family loan repayment terms can also vary significantly by location. The top five toughest state lenders based on the interest rates parents charge were Nebraska (6.8%), Oregon (6.8%), Mississippi (6.5%), Georgia (6.4%) and Arkansas (6.3%), the report found.

Parents in Delaware and Maine tended to be the most lenient when it came to charging their children interest on loans, with 2% and 4% rates, respectively, according to the findings.

Many parents who expect repayment also have a fast-tracked timeline in mind. Twenty-one percent anticipated seeing their loan repaid in one month, 15% within one year and just 8% more than a year later, per the survey.

Although 59% of parents reported being happy to help their kids with money, 27% said they would only do it if necessary, and 4% admitted to feeling resentful.

In many cases, family loans don’t just provide financial support — they’re also “emotional transactions that test trust, responsibility and family dynamics,” Paulson notes.

As young Americans struggle with high costs of living and salaries that haven’t kept pace with inflation, some of them rely on loans to make ends meet.

Nearly half (46%) of Gen Z between the ages of 18 and 27 depend on financial assistance from their family, according to a 2024 report from Bank of America.

What’s more, even though some parents are willing to help their kids out with cash, those loans don’t always come without strings attached — sometimes in the form of interest.

The rest of this article is locked.

Join Entrepreneur+ today for access.

Share this @internewscast.com
You May Also Like

“50th Anniversary of ‘Jaws’ Rakes in $16 Million During Re-Release”

The first blockbuster in history, Jaws, chowed down on $16 million in…

Hong Kong Crypto Payments Startup, Backed by HongShan, Achieves Unicorn Status After Raising $47 Million

Redotpay offers prepaid cards for payments in cryptocurrencies. Redotpay Redotpay, a Hong…

Straight No Chaser Aiming to Reach the Top Once More

Straight No Chaser capped last year with a big win in the…

The Origin of Your AI: Is It Reliable and Trustworthy?

ASHBURN, VA – MAY 9: People walk through the hallways at Equinix…

Megadeth Hints at New Single from Their Upcoming Album

OSLO, NORWAY – JUNE 28: Dave Mustaine from Megadeth performs on stage…