Are You Still Paying The Bills For Your Adult Children?

Is there a retirement vampire in your life – a creature who regularly feeds on your money, draining the precious lifeblood of your post-career life?

In other words, are you still paying the bills for your adult children? If so, you need to gather up some financial garlic pronto; because this monster movie can end badly for both you and your still-dependent kids.

In my recent survey of nearly 2,000 retirees nationally, over 40% of participants acknowledged giving their adult children some level of financial support. I’m not talking the occasional extended family trip to Disney World or extra Christmas cash. These parents are subsidizing on-going aspects of their kids’ lives – private schools, car leases, cell phones, travel,  et cetera – because the children can’t afford the lifestyles they desire.

A significant number of respondents age 55-plus were even helping their kids pay down consumer debt. If you do the family math, that means these cusp-of-retirement parents are likely picking up credit card bills for children who are in their 30’s – or older!

This trend is taking a toll on mom and dad’s retirement savings efforts. Seventeen percent of some 2,500 adults surveyed by Bankrate said that they sacrificed their own retirement savings by “a lot” to help their adult children. Another 34 percent admitted they had “somewhat sacrificed” their savings plans. Those are troubling statistics given that more than 50% of Americans believe they are at risk of a diminished lifestyle in retirement.

My research indicates that putting your adult kids on the pad can also adversely affect your level of retirement happiness. In my survey, the unhappiest retirees overwhelmingly responded that they still prop up adult children. The unhappiest families averaged over $700 per month in support of their kids, while happy retirees at least kept the funds to under $500. At the extremes, a family supporting adult children at over $2,000 per month was more than 400% more likely to be unhappy than a family with fully financially independent kids.

Many parents no doubt feel obligated to help the adult children because of changes in the economic landscape. More young people are attending college today, and higher education costs have soared to high levels. As a result, many young scholars graduate saddled with huge amounts of debt. What’s more, wages, especially for those without a college degree, have been fairly stagnant since the Great Recession.

That said, parents need to understand that underwriting their kids’ lives – in high school, college or adulthood — is not an entirely healthy practice. Stepping in to allow a child to have a nicer apartment, better car, more frequent vacations or just the freedom to not worry about paying the cable, cell phone and car insurance bills deprives them of struggles that build financial muscle and intelligence. It also denies them the chance to revel in their own victories over budgetary adversity. Let your 24-year-old take a second job delivering pizza for six months to pay off that credit card bill. The pride and joy they derive from that hard work and sacrifice will build their confidence and stay with them forever.

Transferring wealth to your kids by paying their bills also creates a long-term risk for the whole family, if you are already struggling to fund a solid retirement. What happens if you run out of money ten years into retirement? Or have a costly health issue two years after you stop working? Your kids could end up supporting you!

Parents of pre-teen kids can avoid this threat to their retirement by preaching and teaching financial independence from a young age. Make children earn the “nice-to-haves.” As they approach high school graduation engage them in serious conversations about college. Do they need a college degree to have a meaningful, fulfilling career? If so, who will foot the bill for that degree? Be crystal clear about the terrible downside of student debt.

If you are currently providing a significant amount of financial support to your adult kids, I strongly urge you to address this issue. Have a serious, reality-based conversation with your children and make a plan to reduce your contribution to their coffers. Depending on your own circumstances you may need to phase out your giving completely.

This conversation may be difficult. But a vampire can only enter your home at your invitation, and only you can banish him.