More parents are supporting their adult children these days and it may be jeopardizing their own financial futures. According to a new study by Merrill Lynch, nearly eight in 10 parents (79%) admit to helping their grown up kids out with money, even if it sets them back financially. But what’s worse? They’re spending twice as much on their adult children as they contribute to their own retirement accounts.
Moms and dads don’t stop wanting to help their offspring out, even when they’re adults, but being an ATM for them isn’t the best way to do it. The study shows nearly three in four parents (72%) say they have put their children’s interests ahead of their own retirement savings needs. And that’s a problem because not only are they not teaching their grown kids financial independence and debt management, by not investing more in their retirement, their kids may have to support them someday.
But even knowing all that, it can be hard to cut off adult kids, so here’s what the experts suggest:
- Give them non-financial support instead - Like allowing them to live at home instead of paying their rent.
- Help them make a budget - Show them how to set up a spending plan or a debt reduction plan or hire a financial planner to help.
- Give in the right instances - Helping with health emergencies and natural disasters is okay and so are little things like helping them pay off a vehicle or keeping them on your cell phone plan for a limited time. Even kicking in for a down payment for a first home is okay, just make sure the adult kid knows the assistance is specific and not ongoing.
- See how responsible your grown up child is with money - If you’re constantly giving money to them but they can’t manage their finances, you’re not really helping.
- Putting yourself first is doing them a favor - Teaching your child to be self-reliant is important and so is giving them the security of knowing that they won’t have to provide for you in your golden years.