How to Keep Clients from Supporting Their Children Indefinitely

It’s hard to be empty-nesters when the chicks keep coming back.

As clients age, their financial priorities often shift toward preserving assets so they can retire comfortably, but many are simultaneously supporting adult children from their early-20s to mid-30s whose wages aren’t keeping up with their living expenses. Post-college kids are withdrawing roughly $500 a month from the “Bank of Mom and Dad,” according to more than half of parents who responded to a TopResume survey. About 30 percent of parents report spending $1,000 a month or more, and in some instances, the expenses continue for years, potentially draining savings and derailing financial plans.

“I’ve seen everything from the family phone plan that never dies to parents paying for housing, student loans or even vacations,” said Patrick Huey, owner of Victory Independent Planning. “Some have delayed retirement, taken on part-time work or cut back on their own spending or savings.”

Cat’s in the Cradle

While there is a growing “trad son” trend (SNL’s Colin Jost can tell you all about that), many young adults are grappling with high rent, steep loan payments and low starting salaries, Huey said. 

Parents often want to help, but those who do risk not only draining their savings but also leaving their children dependent, said Priscilla Birt, lead financial planner at Donaldson Capital Management. “A child who’s never had to budget or contribute financially may not grasp the value of what they’ve been given,” she told Advisor Upside.

The survey also found:

• More than a third of parents spend 11% to 20% of their monthly household income on supporting their children’s job searches, including career coaching, resume writing services and networking events.
• Some 35% of parents also cover expenses like clothing and streaming subscriptions, while about a quarter give their adult children a monthly allowance. 
• One in four parents say these costs have cut into their own finances and delayed retirement.

Cut the Cord. One of the best ways to reach clients who might have an unhealthy financial relationship with their adult children is to show them how much earlier they could retire if they stopped supporting them, said Chris Diodato, founder of Wellth Financial Planning. “That really resonates with people because if they think they have 30 years left, they don’t want to give away a third of that or keep working,” he told Advisor Upside.

Financial anxieties run both ways, too. Many retirees hoard money for their children, even if they’re well-off and independent. “I see clients deliberately take a hit to their own lifestyle to preserve that money,” Diodato said. “They think, ‘Even though I’ve saved $1 million to retire, what if something happens to my kid?’”

For clients who do want to help, specificity matters. Explicitly paying a phone or insurance bill typically results in clients spending less on their kids, Diodato said. “If a parent sends their child a check, that money always ends up disappearing, and they’re going to want more.”