How to Help Your Adult Kids Without Sinking Your Own Retirement

Picture it: a grown adult, old enough to vote and rent a car, asleep in their childhood twin bed under the same glow-in-the-dark stars you stuck up in 1998. Their phone is on your plan. Their streaming is on your login. And that checking account you keep meaning to close? It’s bankrolling a life that technically isn’t yours to bankroll anymore. If that’s your house, welcome to a very big club. There’s even a cute name for it, the boomerang kid, which sounds a lot more charming than it feels when you run the numbers. And the weight of it usually lands on women who are already juggling a job, a household, and parents of their own who are starting to need help.

What I want you to hold onto is this: helping isn’t the problem. Most of us want to, and plenty of us can. The trouble is the slow, no-end-date version, the kind where the money that’s supposed to fund your sixties leaks out a few hundred dollars at a time. You can be generous and still protect yourself. Those two aren’t enemies. Keeping them in the same room just takes a little structure.

The internet is full of the case for keeping grown kids close, and it is not wrong. One post that spread far and wide put the upside about as bluntly as it can be put, written by someone who stayed home and built real savings because of it.

It’s Not That You’re Weak. This Is Everywhere.

A recent Pew Research Center study from January 2024 revealed that 59 percent of respondents indicated they assisted a dependent child aged 18 to 34 with financial assistance within the last year. Forty-four percent of those children reported receiving such assistance during the same time frame. Assistance was primarily provided for daily expenses and monthly charges for cellular phones and streaming services. Fifty-seven percent of adults age 18 to 24 report that they reside with a parent.

The current economic climate has created increased housing costs, student debt obligations, and limited employment opportunities, making it increasingly difficult for younger generations to maintain their independence. So, assisting your child isn’t an indication of their inability to succeed independently. Rather, the manner in which you assist your child is what matters.

Your Retirement Comes First, and Mean It!

Retirement planning is the cornerstone upon which all other considerations hang, and unfortunately it’s one of the primary areas in which parents fail to prioritize their own interests. While your child has many alternatives when seeking to establish their independence (borrowing funds for education, sharing accommodations with roommates, taking on additional jobs, and so on), there’s no comparable financing mechanism for a retirement that falls short because money was diverted to support a dependent child. According to Pew, among parents who provided help, about 49 percent of lower-income parents reported a negative financial impact, compared with 37 percent of middle-income parents and 22 percent of upper-income parents. Before committing any portion of your own resources to assist others, ensure that you continue to contribute toward your own retirement savings (the 401(k), the IRA, and the catch-up amounts allowed after age 50). View family support as secondary to your own retirement savings, not ahead of it.

“One of the things we always say to clients is you can’t take a loan for retirement.”

— Anne McCabe, CEO and partner at Curo Private Wealth (source)

Set a Dollar Amount and a Deadline

The open-ended nature of financial assistance is what does real harm to a budget, because nobody ever decides it has gone on too long. Select a specific dollar amount per month that you plan to put toward your child’s needs and establish an end date for such assistance, and state both out loud. Establishing a deadline provides your child with a defined objective to work toward and lets you see their progress before resentment has a chance to develop. Should your child fail to be ready by the established deadline, you may elect to extend the timeframe. However, that decision should be made intentionally rather than so of failing to set any parameters in the first place.

Collect Rent, Even a Token Amount

Should an adult child be residing with you and generating income, collecting rent serves several purposes. It offsets the cost of maintaining an additional individual within your residence, and it keeps your child in the habit of paying for housing, which is the biggest single expense they’ll incur throughout their lifetime. It doesn’t have to be set at market rate. Charging $200 to $300 a month will suffice to demonstrate the expectation that your child pays for housing. Many parents have been known to collect that rent and later apply it toward a down payment on an apartment or condominium, which forces a little saving on the side without creating undue hardship for their child.

None of these suggestions diminishes your generosity. Rather, it lets you be generous while making sure such generosity remains sustainable over time. By setting a fixed dollar amount per month that you’re prepared to contribute, along with a definite end date, and by continuing to contribute toward your own retirement, you provide your child with evidence of something better than money: that you’re capable of loving them and setting boundaries at the same time.

Help with a hand up, not an open tab

You can tell the difference between the kind of help with a finish line and the kind without. When you put up the money for something concrete, be it a pro license, a car fix to keep a job, or the deposit on an apartment for the first time, you’re in effect giving your child a leg up toward being on their own. And then it’s done. A regular monthly stipend with no expiration is another matter; it has a way of underwriting an existence that doesn’t have to make its way in the world. It’s all born of love, but there’s only one of these with a way out.

For one thing, a “yes” should be to something in particular. Put a name to the objective and the figure, and consider it done once it’s. It may not seem like it, but there’s a certain kindness in that kind of order: you put a target in front of your child to work for, and in the process you’re saved from the kind of chagrin that can set in with unbounded generosity.

Cosigning is not a favor, it is a loan you signed

On the surface, cosigning is a favor to a child. In the eyes of the law, however, it’s no different than you’re the one with the debt. Should your son or daughter fall behind on a payment for a loan or lease you put your name to, the lender won’t be so lenient. Your credit is what suffers and you become responsible for the whole thing. Most parents do it out of goodwill, only to find out the hard way what they have put themselves on the line for, and usually when they can least afford it.

For one thing, it isn’t necessarily a misstep, but it’s a call you have to put in the balance as you’d with any other loan. Put yourself in the position of having to cover the entire amount; can you? There’s every possibility you’ll have to. When you can’t, it’s wiser to be on the side of a modest gift you can put your hand to rather than a heavy burden you aren’t in a position to handle.

Teach the skill, not just cover the bill

For one, what you can give an adult child of real worth is rarely a check. It’s the means to do without it. There’s value in putting some time in to put together a first budget, or in opening a Roth IRA and making the case for why early investments add up. You can also show them how a credit score is made and unmade. Such things have a way of being useful well past the point where any one bill has been paid.

A small present can be put to good use here, too. Put in a dollar for every one your child puts in a Roth, on the order of an employer’s 401(k) match. It’s a way to see that you aren’t merely putting out a fire for the month, but are instead reinforcing the kind of discipline you want to see. In the end, you’re giving more than cash; you’re instilling the very thing that will make your contribution superfluous down the line.

Photo by Vitaly Gariev on Unsplash