Are your grown children still living at home?
Have you been putting less into your retirement savings to support them?
Are you struggling with whether or not to cut the cord?
It’s natural to want to help your kids and give them the best opportunities. But is it wise to compromise your own financial future?
Many parents with adult children face this dilemma: When should you encourage your kids to become financially independent? When should you cut the cord?
What is financial independence?
Financial independence means your children can support themselves, manage their expenses, and make responsible decisions about saving, spending, and debt.
It’s not just about having a job—it’s about building the skills and habits needed to live within their means, plan for the future, and handle financial setbacks.
If your children know you’ll always step in to pay their debts or cover their expenses, they may never develop the discipline and confidence that come from managing their own finances.
This safety net can delay their growth into self-reliant adults and may even create a cycle of dependency that’s hard to break.
What about the impact on your own financial security?
If you don’t have enough saved for retirement, especially with rising health care costs, you could face difficult choices later.
For example, a healthy 65-year-old can expect to spend $172,500 on health care over their lifetime, and nursing home care—which isn’t covered by Medicare—can cost $128,000 per year.
If your resources are stretched thin, you may have to rely on your children for support in your later years, which could strain your relationship and their finances.
When deciding whether to stop financially supporting your children, look at two main factors.
First, assess your own finances. If you think you can “catch up” later, consult your CFP® to run some scenarios and get a reality check.
Second, honestly evaluate whether your support is helping or hindering your child’s financial growth. This evaluation can be tough, and spouses often disagree.
You might even give your kids a choice: “Would you rather I help pay down your student loans and possibly live with you when I’m older, or should I focus on saving for my retirement and long-term care?”
Ultimately, deciding when to cut the cord is challenging, especially if you want to help with student loan payments.
There’s no universal rule—every family and every child is different.
Consider your perspective, your spouse’s, and your child’s.
If you’re struggling with the decision, have your CFP® model various scenarios. Seeing the financial impact can make the choice clearer.
(Update to original post from October 14, 2016)
ABOUT THE AUTHOR:
Niv Persaud, CFP®, CDFA®, RICP®, is a Managing Director at Transition Planning & Guidance, LLC. Life is more than money. It’s about living the lifestyle you want and can afford. For that reason, Niv consults with clients on money, life, and work. Her approach capitalizes on techniques she learned throughout her career, including as a management consultant, executive recruiter, and financial advisor. Her services include developing comprehensive financial plans, divorce financial reviews, and retirement plans. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me.’”