Cutting the Financial Cord with Your Adult Child – It Can Benefit Both

Footing the bill for your adult children can thwart their path to independence and imperil your finances and retirement

Introduction

Failure to Launch…

Hmm, what’s that all about.

Perhaps you remember that 2006 movie with McConaughey playing the adorable character Tripp. That’s a name that tells you this guy marches to his own beat – he’s a Tripp.

Now Matthew seemed just about the perfect guy with the world at his fingertips. Except for one little flaw.

Apparently his mom and dad, played by Cathy Bates and Terry Bradshaw, had come to realize that for their sakes and his, Tripp needed to take flight and leave them alone in the roost. They very much wanted to move on to fun and excitement in their retirement years.

And that minor flaw… Well, it was no longer so minor…or cute.

Tripp had failed to launch years back when he had been expected to. He was now a 35-year-old professional layabout. One that while gainfully employed and actually making good money, was happy to stay at home where he’s waited on hand and foot by mom. And starting to make dad more than a little exacerbated.

If you haven’t seen the movie it’s worth the watch…c’mon, it’s McConaughey.

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Kidding aside, the issue of “launching” is a serious matter in many households. The transition from childhood to that of adulthood can be very tough for young adults, as well as us not-so-young parents of those young people.

When things go great and the next thing you know they have moved out, obtained a college degree or taken on a trade they love and are successful at, established their own household and are contemplating marriage and the eventual possibility of kids…

Whoa…slow down…we just went into some sorta funky fast-forward dream land.

Let’s keep this simple. Like maybe we can picture them just getting started off in their adult life with some base hits versus swinging for the fences.

That would be alright. Right? In fact, it’s great!

But what about when that doesn’t happen? Now that can be tough for real…at times even nightmarish.

Today we take a look at some of the pressures and issues young adults and their parents can face during the transitional period leading to adulthood and independence. And even measures you might find you’ll have to take to avoid your own Tripp. You’d be surprised to find that many more deal with the “launch” issue than you might realize.

If that happens. for whatever reason, and is left unchecked, it can prove harmful to all parties and it’s not an easy cycle to break.

Fortunately, cutting the support cord can be done in small steps and end up being a positive for your kids and you.

The measuring stick

In the past, the common criterial for measuring young people transitioning to adulthood included a number of milestones, such as full-time employment, living on their own, being financially independent, getting married and having a child.

Across all those metrics things have changed considerable going back over 40 years to the 80’s.

According to Pew Research Center analysis of U.S. Census Bureau research (Young adults in the U.S. are reaching key life milestones later than in the past), in 2021 roughly 39-percent of 21-yr-olds were working full-time compared to 64-percent in 1980.

Regarding another key milestone, back in 1980 roughly 44-percent of 21-yr-olds were considered financially independent of their parents – earning at least 150-percent above the poverty level of income.

Meanwhile, in 2021 only 25-percent were considered financially independent of their parents by the same measure.

The trends across those and other key milestones regarding adulthood and independence have grown even more delayed in life for young adults.

Some other telling numbers:

• More than 7 million young adults in the U.S. between 18 and 34 still live with their parents. That’s the highest level in 80 years for those in their 20s to 30s
• 64-percent of parents with children 18 or older allow them to live at home and nearly half are paying their kids’ monthly bills
• 47-percent of adults reported they are still supporting their adult kids in November 2023 according to Edelson Research, which was up from 40-percent in 2022
• Adult children living with their parents who don’t contribute to household expenses in 2024 is 61-percent this year, up from 54-percent in 2023

Common reasons why many fail to gain independence

When it comes to reasons we see more younger adults struggling to gain their independent footing, there’s plenty. And many can be attributed to changing norms in our society.

• There’s more kids going to school now than in the past. According to Statista, nearly 53-percent of young adults age 20 to 21 were in college in 2020. That’s compared to 31.9-percent in 1970
• Another factor is that more young people are delaying marriage or choosing to not marry at all. According to the National Center for Family & Marriage Research, in 1970 the marriage rate was just over 76-percent. In 2023 the marriage rate stood at just over 31-percent
• The U.S. birth rate in 1970 was more than 88 births per thousand, while in 2024, the birth rate stands at just over 12 births per thousand

Clearly young adults are delaying on what were clear markers for adulthood just decades ago. Today they are staying in school longer and are marrying and establishing their own households later than was the case with previous generations.

Not surprisingly, today’s young adults find themselves lacking the means to support themselves earlier and are living in their parents’ homes well into their 20s and even early 30s.

Some of these changes are linked to economic challenges, while others definitely appear to represent a realignment of goals and priorities.

More deep-seeded issues

Unfortunately, there are also many young adults who have issues and carry baggage the can stand in the way of gaining independence and seeking happiness.

Psychologist Jeffrey Bernstein Ph.D., addresses issues that can impede some individuals when it comes to lifestyle skills and attempting to gain independence.

In the article The 6 Distorted Realities of Struggling Adult Children (Physiology Today, Nov. 2023), Bernstein provides key issues that can hamper young adults as they seek to develop important lifestyle skills:

• Dependency issues – financials and emotional dependence
• Excessive fear of failure
• Lack of life skills
• Unrealistic expectations
• Escapism
• Enabling behavior
• And, more

Overall, Bernstein talks about adults of all ages struggling to gain their emotional, psychological, financial and other forms of independence. These issues can impede or affect the ability of people to engage with reality. Professional help can often be necessary when it comes to attaining independence.

Healthy struggle to prepare for life

As a parent, you know that one of the worst parts of the gig is watching your kids fail or struggle. Watching them get picked on or bullied, not getting selected, losing an important match or event, struggling with a class or subject…just struggling in any manner.

Our instinct is to swoop in and save them or make it better, no matter the situation. But life and our own experiences tell us you can’t always do so. Nor should you do so.

As much as it can hurt, you have to start letting go way before they ever finish high-school or strike out on their own. They have to struggle to learn how to stand on their own so that they are prepared later in life when things inevitably get rough at times.

In the process of letting your kids learn to struggle some, they gain the added benefit of learning for real that they can make it through all kinds of hardships. And the confidence in themselves to do so.

They can’t gain that perspective and confidence without going through some struggle.

It’s best to remember that while saving them might make you feel good, doing so may be at their expense.

Signs you might be overdoing the support

It can be difficult for anyone to self-assess their actions, especially when they are intended for the good of others. But it becomes evident at some point, whether or not you elect to do anything about the situation, when you recognize you are being played.

If you are going to work every day and so are they, you are probably proud of them and they of themselves.

If instead they are laying around the house doing nothing to contribute day-in-day-out for an extended period (even years), then chances are you’re getting played.

You can come up with all kinds of circumstances like this. And you might be able to tell yourself your adult children will outgrow this phase (and it might even happen), but there comes a point where you have to wonder. Maybe even get a little skeptical.

When you get to the point where what you are giving your able-bodied adult children is more than you can literally afford, then you are overdoing it.

It’s at that point that you need to start looking at everything and ask some serious questions:

• How often do you help them financially?
• What type of help?
• How much monthly on average?
• A tough question – is this assistance hurting you financially?
• Are you able to do what you want or having to cut back, possibly delaying your retirement or lowering your standard of living?
• Are they really struggling to cover the basics and legitimately living week-to-week, or are they living large on your dime and seemingly unconcerned?
• Do they seem to know or care you might be struggling?

A recent study by Qualtrics for Intuit Credit Karma found that more than seventy-five percent of parents in the U.S. reported that the support they give their adult children impacts their personal finances.

In turn, more than half reported they were cutting back on current living expenses. Even worse, more than a quarter were finding they needed to postpone retirement.

Helping financially doesn’t just hit the wallet either, with parents nearing or in retirement reporting that mental and financial stress are affecting them.

Newsweek’s Alexander Fabino reported recently in the article Americans Crushed by Retirement Crisis as They Support Adult Children (Jan. 2024) that nearly 60-percent of adult parents in or approaching retirement are experiencing mental and financial stress. Yikes!

There’s one last striking statistic that should worry you and be a sure signal you might be overdoing the support. Recently, Savings.com published an article on this topic, These parents contribute 2X more to their adult children monthly than their own retirement accounts (Beth Klongpayabal – May 2024).

At a brass-tacks level, the article reports that parents are providing approximately $1,384 to their adult children monthly. Comparatively, that’s more than twice the monthly retirement contribution of $609 made by the average adult.

Bottom line, if you can’t afford that and it’s endangering your financial well-being and security, then something needs to be done.

Planning time

Okay, so you’ve reached the stage where you’ve decided for yourself there are issues and something must be done. Be it shifting societal norms, having kids that just don’t seem to get the fact they have to take care of themselves at some point, or you realize that as a parent you coddled them and fought their battles too often versus assisting them to launch (which is now a problem), so now you must act.

Whatever the reasons, the sooner you gain this realization the better. Change is needed. And as you are probably aware, change is never easy. You have to create a plan to bring change about. (insert link for the micro financial habits blog)

First things first, you have to decide whether your young adult(s) loves you and is willing to work with you.

If you think the answer is no, then this will likely be all on you and you will have to make the “independence plan” on your own and then share it with them.

If instead you know they care and want to gain their independence, no matter who or what might be at fault, and would be willing to work with you, then you should sit down together to create this plan designed to help them gain their independence.

Either way, this transition won’t happen right away and will require a budget. In order to be realistic it will take time. You, or both of you, will have to break down all your kid’s income sources, essential bills and their spending (they are not necessarily the same) in order to ensure both of you have a good handle on everything.

In terms of income, find out what they bring in monthly from difference sources. Do they have a job or even a couple? Do they get money from others, such as another parent, family, friends, et. cetera.

If they don’t have a job then the first major point that you’ll need to convey is the fact they have to get gainfully employed, no matter how little that might bring in to start.

It’s important you make it clear that even a little helps. But the bigger issue is that starting a work history and gaining the benefit of dignity that comes with a job. Progress creates gains over time.

And that has to come with a firm time limit. If there is no time limit or consequence you’re very likely to be looking at the same situation months or even years from now.

If they refuse or fail to secure employment within a fair timeframe (example – three or six months) then you and they both almost certainly need professional help in order to have any chance of resolving this. Fact is their refusal might make this irreconcilable.

Moving on, if they are already employed then you work around their job for at least now and then help them to upgrade when it is practical.

From that point you can begin to build a budget that has you paying some, if not all, their bills. Remember, the plan is built around the idea of helping them establish themselves. So you want to help them get their feet on the ground and somewhat established, and then you can start to cut financial ties in a doable, organized and timely fashion.

From that point you should pick out (or you both do so together) a timeframe for them to start taking over a specific bill, one at a time. One to three months for each should be doable.

An example would be them starting to pay their car insurance. If they don’t have one they put the money back from savings over time or give to you to help them save. You can even build in an incentive involving your help with a vehicle under certain conditions.

From there you can continue to add in items over time (within reason) to the point where they are paying all their bills and paying their half of the home bills if they are living with you. This could take some time, so you have to stay after them to ensure they keep on track.

If they live away from home then you want to ensure they are paying their bills, including their rent.

One last important point in building their budget is that of allowing room for savings. It teaches them the value of saving, and also allows them to start putting money back for an eventual home, investing, et. cetera. Think of it as kickstarting their nest egg.

As you go through this the goal is to work with them voluntarily. Or if necessary through tough love (which is still love), utilizing the plan to guide them toward their financial independence.

Bottom line, forget the notion and fears that you’re cutting ties and will lose them. Instead, you need to view this as a gift – you are helping them launch and gain one of life’s most wonderful experiences. They obtain the liberating gift of gaining their adulthood and a belief they can take on anything life can throw their way.

Taking the initiative may yield another benefit – a better relationship between you and them for years to come.

Conclusion

We had a little fun with Tripp earlier, but this is a very serious subject and it can be a tough time and issue for you and your adult kids.

You can do your very best for years on end raising them, but that doesn’t guarantee a happy ending.

Even if you seem to be on opposing pages when it comes to how they should venture into adulthood, which doesn’t mean you or they are wrong. Or they are doomed…or these rough waters will last forever.

Life changes…it’s funny that way.

But what you do have to do is guard against allowing your adult children to drag you down so much that you ruin your savings and possibly even your retirement.

Just as with a person struggling in the water, who can pull you down while you’re trying to save them, you have to stay calm, take control and guide them back to land. It’s the same here.

If you are struggling with an issue like this, you need a plan. And probably might benefit from speaking with a professional equipped to deal with what can be complex issues.

While we are on the subject of your finances, have you attended to your retirement plan?

If you have one (either your own or one created for you), our team would be happy to review it to determine if it is capable of adequately and securely meeting your goals and those of your family.

Or we can assist you by creating a customized retirement plan capable of helping you to retire with confidence. We can build a holistic, comprehensive retirement plan addressing relevant issues, utilizing strategies that ensure your loves ones are protected, as well as asset allocation, risk, Social Security, taxes, income, spending, healthcare, legacy, and more, customized to your family’s specific needs.

A plan created with the goal of ensuring you can successfully live out the retirement you envision.

If you are ready to take the next step and talk to a team of retirement planners who can advise on all your retirement needs, and who will put your interests first, Schedule a call today!

 

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