When It's Time to Cut Financial Support to Your Parents or Adult Kids

Family financial ties grew strong during the Great Recession, and by many measures the bond holds fast. Yet the level of support that working households offer aging parents and adult children may be setting back the retirement plans of millions.

During the depths of the financial crisis in 2009, Money reported on the changing nature of family values. Expensive vacations, shopping for sport and big new houses were out; relationships, time together and sharing was in. These shifting values were borne of necessity for many, and it was not clear how long the new values would stick.

But while spending has rebounded, surveys in the years since have confirmed that family financial ties remain strong. A quarter of boomers and a fifth of Gen X and Millennials currently support family members, according to a new survey from TD Ameritrade. This support averages $12,000 a year and comes on top of caregiving chores, which one third of financial supporters also provide.

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On average, mothers receive the most support, $13,000 a year while fathers received $8,500 and adult children get $10,000, the survey found. For the most part, this support is offered unconditionally—64% of financial supporters say they are “very glad” to offer help to a parent and 53% feel the same about supporting an adult child.

Financial supporters would offer more if needed. One in three would delay retirement to help an adult child and 69% say they will stay with it until their child finds a decent job. Yet if push came to shove, and there was not enough money to support both, an aging parent would win out over an adult child, the survey found. Financial supporters are twice as likely to say it is more acceptable to support a parent than an adult child and, if forced to choose, four times more likely to support a parent.

Most say their support is not causing hardship. Only 22% say they are digging into savings while 30% say are making modest lifestyle sacrifices. But they may be doing more damage to their own financial security than they know. On average, financial supporters have a $22,000 balance on their credit cards and $75,000 in outstanding mortgage debt. A third say they have already delayed retirement and half say if they had to retire unexpectedly they could no longer offer the same level of financial support. Only one in five has discussed any of this with an adviser.

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Generous financial support can be its own reward, drawing families closer in times of need. But the long-term impact may be difficult to see. Many who plan to work longer may not be able to. Nearly half of retirees left the workforce unexpectedly because of disabilities, other health issues or problems at work, an EBRI survey found. So what seems like an easy fix is anything but certain.

Cutting support for a loved one is not easy or fun. But it may be easiest with adult children because they have a lifetime to recover from college loans or a slow start in their career. With parents, cutting support may be in order if you examine where the money is going and see that not all of it is well spent.

In the end, any support decisions should be made with your own financial security in mind, and that means looking ahead to what you expect from your retirement and whether you have a cushion against unexpected developments like a job loss or health issues.

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