I’ve been talking about the financial relationship between parents and their grown children for years, and every time the Savings.com annual study on financial support for adult children comes out, I’m shocked by the numbers. The latest figures confirm a disturbing trend: parents are sacrificing their own financial well-being to prop up their adult kids.
The Staggering Cost of the “Bank of Mom & Dad”
The problem is widespread. The Savings.com study shows that half (50%) of parents with adult children are providing regular financial assistance to their grown offspring.
And we’re not talking about spare change. The average support these parents provide is a staggering $1,474 per month, totaling almost $18,000 annually. Think about that: nearly $18,000 a year, routinely, is flowing from parents to adult children who are fully capable of working.
But here is the most important and alarming statistic: Nearly 50 percent of the parents providing this assistance say they have sacrificed their own financial security to do it. For parents still in the workforce, the numbers are even more painful: they contribute 2.3 times more to their adult children each month than they do to their own retirement accounts.
If you’re giving money to your grown kids to the point where it’s impacting your ability to pay your bills, save for retirement, or live the life you want, we have a real problem.
Where Is All That Money Going?
When I look at the expenses parents are covering, some items are expected, but others are downright questionable.
It makes sense that groceries top the list. In fact, 83% of supporting parents help with their adult kids’ monthly food expenses. If a child is truly struggling, helping them avoid hunger is understandable. And, due to the structure of family cell phone plans, 65% of parents still cover their adult child’s cell phone bill. It’s not a huge expense, but if money is tight for you, why are you still paying that bill years into their adulthood?
Now, here is the one that really got my attention, and frankly, it is infuriating. The study shows that 46% of supporting parents help pay for their adult children’s leisure and vacations. Wait a minute. Wait a minute. Wait a minute.
If your kid can’t afford groceries, that’s one thing. If they can’t afford rent, that’s a rough patch. But if they can’t afford to live independently and they are relying on you to fund their travel, that is a massive, self-inflicted wound to your financial future.
Clark Howard’s Ground Rules for Helping Adult Children
I know the temptation to help is strong. You love your kids, and you want to see them succeed. But you cannot set yourself on fire to keep them warm.
My primary rule for the Bank of Mom & Dad is simple: Never, ever give an adult child enough money that they lose the incentive to work, have ambition, or seek independence. I’ve known people who never worked a day in their lives because they were enabled by their parents their entire adult lives. That is a terrible outcome for everyone.
The support you provide should be episodic, not routine. If your adult child hits a rough patch — they’re going through a divorce, they lost a job, or they have a serious health issue — then providing temporary, defined assistance is reasonable if you can afford it.
But if you are routinely handing over $20,000 a year, you are jeopardizing your own financial security. Remember: Your kids can take out a car loan or get a second job, but you cannot take out a loan for retirement. Protect your future first. Otherwise, you’re just setting up a situation where your children might have to support you later on, and nobody wants that.
