Nearly half of American parents cover monthly expenses for at least one of their adult children, even if it’s at the detriment of their own retirement savings, according to a survey from Savings.com. 

On average, Baby Boomer parents are paying more than $1,400 toward their adult child’s monthly expenses, leaving many without the extra cash flow to fully fund their retirement savings accounts, the survey found. Parents who are a decade or less away from retirement are more likely to offer greater financial support to their adult children, paying closer to $2,100 per month toward their adult child’s expenses, while only putting away about $643 for their retirement. 

The most common expenses parents help their adult children cover each month include:

• Groceries / Food (76 percent)
• Cell Phone (63 percent)
• Rent or Mortgage (56 percent)
• Health Insurance or Healthcare (50 percent)
• Leisure / Vacations (43 percent)
• Car (41 percent)
• Tuition / Education Expenses (39 percent)
• Discretionary Spending (36 percent)
• Student Loans (21 percent)
• Credit Cards (17 percent)
• Investments (12 percent)

The most expensive monthly expenses parents help adult children with include:

• Tuition / Education Expenses ($870)
• Rent / Mortgage ($806)
• Investments ($398)
• Car ($342)
• Leisure / Vacations ($263)
• Student Loans ($245)

Bank of Mom and Dad

According to the Savings.com study, 57 percent of adult children who received financial help lived at home with their parents. Of those adult children cohabitating with mom and dad, about half contributed financially to the household expenses, spending an average of $186 per month.

Although the majority of young adults receiving financial support are between the ages of 18 and 24, one-third of the adult children receiving financial support are Millennials, who are roughly age 27 to 40. Similar research has found that nearly 1 in 4 Millennials rely on their parents to pay their rent, and more than one-third had at least one bill paid each month by the Bank of Mom and Dad. 

It’s not that young adults are lazy or stingy, they just happen to be experiencing an extremely challenging financial climate, researchers noted. From exorbitant student loan debt and housing costs to stagnant wages and economic crises in 2008 and 2020, there’s a growing generational wealth gap, the Savings.com study said. 

“There’s just a lot of pressure on younger adults, and they might still be reaching out to their parents for support,” said Corie Wagner, senior editor of industry research at Savings.com. 

“The situation for young adults today is much more bleak than for some previous generations,” said Christine Percheski, a sociologist at Northwestern University. “We are not covering as much of the cost for college as we did for previous generations. And young adults are facing a tough housing market that is not of their making.” 

Percheski has a point. The Savings.com study noted that since the 1960s, the number of young adults living at home in their late twenties and early thirties has increased because of this generational wealth gap. It noted that in 1960, nine percent of young adults lived with their parents, but by 2022, that number had increased to 16 percent. 

Millennials in particular have been hit hard financially by many of these economic events. According to data from the Federal Reserve, total generational wealth for Millennials nearly doubled during the pandemic, but still their wealth is “dwarfed” by the Baby Boomer generation, which owns more than half the wealth in the U.S.

“The biggest driver of wealth for average Americans, homeownership, remains out of reach for many Millennials,” the survey says. “By age 30, 51 percent of Baby Boomers were homeowners compared to 42 percent of Millennials. Given the economic factors at play, it makes sense why young adults living at home may not contribute much to their household coffers.”

The key question, Percheski said, is whether the parent’s largesse is shepherding the adult child toward an independent and prosperous adulthood. 

“Is the economic support that you’re providing your child helping position them for a better future?” she said. “Or is it enabling them to delay taking on adult responsibility?” 

Nearly Half American Parents Footing the Bill for Adult Children, Even at Detriment to Own Financial Health

Nearly 8 in 10 parents financially supporting their adult children (79 percent) reported that the money they give to their adult children is the money they would have otherwise used for their own daily expenses. 

One NerdWallet analysis estimates that parents who choose to cover an adult child’s expenses sacrifice as much as $227,000 in lost retirement savings. But as 81 percent of parents shared with the researchers, it was more important to them to financially support their adult children even if that means putting themselves at financial risk. 

Forty-four percent of parents surveyed said they would be willing to take money from their retirement funds to support their children, while 33 percent said they would be willing to delay retirement to financially support their children. But parents who cover rents and car payments for adult children risk short-changing their own retirement plans. Among the surveyed parents who support adult children, three-quarters reported stress about their ability to live comfortably in retirement. 

Given how close many older Americans are to retirement, the dramatic loss of potential retirement savings and potential for a shaky financial future has many financial experts worried. 

“The question really should be, Are you putting enough away for retirement or not?” said Jim Kinney, a certified financial planner in New Jersey.  “If you’ve got a retirement plan, and you’re golden, and you want to help your kids buy a first house, then good, and God bless.”  

Parents who have not budgeted for their retirement should make that a priority, Kinney said. “You have to kind of take care of yourself. Your kids have years and years to get their financial footing.” 

And in some instances, the adult children don’t actually need the money, they just continue to accept it because they believe their parents can afford it, according to a survey conducted by market researcher OnePoll for Chartway Federal Credit Union in Virginia.

When the OnePoll survey asked Millennials why they had their parents cover some of their expenses, the largest group, 30 percent, chose the response, “They haven’t told me to pay them myself.” Another 26 percent said it was “cheaper” to stay on their parent’s tab. A smaller group said, “Because they are financially comfortable.” Only 12 percent said they could not afford to pay the bills themselves. 

The Financial Conundrum for Parents

Given that a Credit Karma survey found that two-thirds of the parents who financially support their adult children said doing so causes them financial stress, financial planners say parents should budget their own expenses before they offer support to an adult child.  

“The parents should be taking care of themselves first,” said James Lee, president of the Financial Planning Association, a trade group. 

“What I would recommend is that the parents make sure they’re taking care of their own finances, and are saving for their own retirement, so that they won’t run out of money in their own lifetime,” Lee added. 

If you’re looking at your budget or a retirement calculator and the numbers are not adding up, it’s time to have a difficult conversation, says Courtney Alev, consumer financial advocate at Credit Karma. “Set an expiration date, or a deadline for the adult child to take over the bills. Set that date, and then be willing to engage with your child.” 

“Part of your job as parents is to get your children to the point where they’re financially independent,” says Denise Kautzer, a financial therapist based in St. Paul, Minn. If you are always bailing them out, they may not act responsibly when it comes to handling their finances themselves.

If you’re a parent who has been financially supporting an adult child but can no longer financially afford to do so, the AARP wrote an article offering tips on how to have a conversation with your adult children and let them know that the financial assistance is ending without hurting the relationship. 

Here is some advice from the AARP on how to have this conversation with your adult children:

1. Prepare in Advance

Think about what you want to say before you say it, Kautzer says. You may say you’re willing to provide support, but only to a certain extent. If so, be ready to lay out those parameters.

2. Expect the Conversation to be Difficult

“If this has been going on for a long time and this was a well-established pattern, when you go to change that, it can be a very stressful conversation,” says Kautzer.

3. Explain Your Own Financial Needs

If you are less prepared for retirement because of the financial help you’ve given your children, they may end up taking care of you years from now. “It’s kind and generous to take care of your own needs, because the reality is, if you don’t, then you are making your situation their problem down the road,” says Meredith Stoddard, vice president of life event planning at Fidelity Investments. Make sure they understand that.

4. Give Them Time

It’s a little unfair to blindside your adult children and tell them the financial help they’ve been depending on will end tomorrow, says Kautzer. Instead, give them some time to prepare by cutting back incrementally, or by letting them know things are going to change and giving them a timeframe for when the monetary help will stop.

5. Don’t Blame Them

Even if the adult child is the one who has been asking for, or even demanding, financial support, focus on your feelings when having the conversation. For example, you can go to the adult family member and say, ‘I have some discomfort about the way this is working for us now financially. I’d like to be able to talk with you about it.’

6. Make it an Ongoing Conversation

Everything doesn’t have to be decided at once. Perhaps you talk about it and let everyone take some time to think it over before reconvening to determine a resolution, says Stoddard.

7. Remember Nothing is Permanent

Keep in mind that you can always make a different choice if your child encounters a true emergency, such as a job loss or an illness, and you want to help out, Kautzer says. “You can say, ‘For this period of time or for the next three months, we’ll help you.’”

8. Let your Child Grow

Parents with adult children must pull back at some point and allow their children to learn their own lessons and recover from their own financial mistakes. “Trust in your children that they are going to be okay,” says Stoddard, “and that they can stand on their own two feet.”