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Ways to Keep Your Adult Child From Ruining Your Retirement Savings

4 actionable strategies to help you and your son or daughter

By James Nichols

The last thing a parent wants to do is see his or her child — no matter the age — go without. That is why many boomer and Gen X parents continue to support their kids financially into adulthood. In fact, in a 2015 Pew Research Center survey, 61 percent of parents in the U.S. admitted to helping their adult children financially.

Adult Child
Credit: Adobe Stock

For some parents, “helping” can mean offering an occasional personal loan for a one-time expense, like a down payment on a car. For others, it might mean ongoing support such as subsidizing their grown child’s rent. The hard truth, however, is that when parents put their child’s finances first and their own retirement savings and planning second, there could be long-term ramifications for everyone.

4 Strategies for Parents to Consider

That said, there are four actionable strategies for parents to consider in this situation, which can help them position both their child and themselves for financial success in the future:

1. Have a clear understanding of your finances and retirement goals. Before engaging in a conversation with your son or daughter about what kind of support you are able and willing to provide, be sure to have a clear understanding of your monthly budget and personal retirement savings goals. For example, do you have enough saved for any unexpected health care costs? Are your savings on track to support the lifestyle you want in retirement? Generally, people need to replace at least 70 percent of their pre-retirement income to sustain their lifestyle after they stop working.

Visualize your post-career life, and then ask yourself if you can still live the way you want to while supporting your son or daughter financially. For instance, do you hope to travel more or perhaps purchase a home closer to your grandchildren? Will you take up a hobby or spend more time doing activities you hadn’t had time for while working?

It’s OK to be a little selfish. After all, you’ve earned it. But it’s important to think about the cost of your ideal lifestyle and whether your savings goals can still be met while providing monetary support to others.

2. Be transparent and honest. The great thing about having transparent financial conversations with your adult children is that your kids are likely entering a life stage where they are managing their finances for the first time. Showing them that you have a clear understanding of your financial goals and that you are committed to accomplishing them sets an example for them to replicate as they begin their savings journey.

Setting boundaries and clarifying expectations is also key. Be specific about the level and duration of the support you’ll provide. Do you intend to help with student loans or housing? Or maybe expenses like a cellphone plan or groceries?

Some parents like to establish an “independence fund,” which is a one-time amount to help an adult child get started. Being upfront early about what the type, and amount, of assistance you intend to provide could prevent tension and hurt feelings down the road.


3. Consider bringing a third party into the equation. Whenever possible, working with a trusted professional like a financial adviser can add much-needed objectivity to a potentially emotional conversation. By reviewing your financial plan with your adviser and your adult child, you can help both understand what a loan’s impact could have on your financial plan. It then allows them to reflect on whether they want to put you in that position.

In a worst-case scenario, if a parent provides too much financial support to a child, the mother or father might end up needing that same child to, in turn, provide support during retirement. The last thing most parents want is to be a burden on their kids later in life.

4. Put it in writing and check in regularly. No matter how much or how little you decide to give your child, put the agreement in writing. This ensures that both of you have the same expectations and gives you the ability to refer back to the plan and timeline on a periodic basis.

Review the document annually, or as needed, to see if it’s still reasonable for everyone involved. Perhaps your child has just gotten his or her first promotion and raise or you’ve incurred an unexpected expense due to a medical emergency. Your son or daughter should understand that life happens, and circumstances may change down the road.

Navigating financial discussions and agreements with family can be difficult. But allowing yourself time to assess your finances, prepare for the conversation and potentially involve an adviser can help you offer support for your child without undermining your lifestyle in retirement. If nothing else, you are setting a good example for your children about making sound financial decisions.


Investment adviser representative and registered representative of, and securities and investment advisory services offered through, Voya Financial Advisors, Inc. (member SIPC).

James Nichols leads the customer solutions group for Voya Financial, helping Americans plan, invest and protect their savings — to get ready to retire better. Read More
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