Spoiler alert: It may be costing you upwards of $17,000 a year!
This One Common Habit Could Be Depleting Your Retirement Savings—Just Before You Really Need the Cash
Published on Apr. 28, 2025
It’s a common refrain that if you’re able, you should be planning for retirement by budgeting, diversifying your portfolio and making the most of compound interest. But if you’re a parent, there’s a good chance that you’re limiting your retirement savings by spending a little here and a little there without realizing it, instead of depositing the cash.
According to a recent study by Savings.com, there’s one common spending habit that some parents of adult children are indulging in, just as they should be ramping up their savings for retirement. Read on to learn what it is—and how to break the habit.
Get Reader’s Digest’s Read Up newsletter for more news, humor, travel, tech and fun facts all week long.
How was the study conducted?
In February 2024, Savings.com surveyed 1,001 parents of adult children in the U.S. The respondents had a median age of 56, and the median income was between $50,000 and $74,999 annually. Income disparities were factored into survey results, and the data focuses on those who have adult children without disabilities, as adult children with disabilities may not be physically or mentally able to live independently.
What’s the common habit that’s hurting retirement savings?
The common habit hurting retirement savings is paying for your adult children’s living expenses. According to the survey results, half of the parents with adult kids routinely help them financially. While it may be tempting to cover some bills while your kids are starting out, overcoming a job loss or rebounding from another setback, it comes at quite an expense: Working parents who support adult children contribute more than twice the amount each month to their adult kids than they do toward their own retirement accounts, the study found.
As you get closer to the age where you’ll need money for retirement, that’s a lot of money not going into your 401K, IRA or other retirement account. The average amount of monthly support that parents provide for each adult child is $1,474. That’s more than $17,000 per year! According to the parents surveyed, here’s where some of that money goes:
- 83% help cover grocery costs: $220/month
- 65% assist with cellphone bills: $63/month
- 63% help with rent or mortgage: $653/month
How to curtail the spending
More than one-third of parents surveyed who provide financial assistance to their adult kids plan to stop doing so within the next two years. Ending the monetary support isn’t only helpful for a parent’s savings; it’s also key for fostering financial literacy and independence in adult kids, says Michael McMillan, PhD, a professor at the University of Maryland’s Robert H. Smith School of Business and co-director of the university’s Financial Wellness Center. The financial support “is likely an outgrowth of how the parents treated their children when they were in college,” he says. “The longer it goes on, the harder it becomes to cut the cord.”
Here are a few tips for how to cut the cord on financing adult children’s lives:
-
Be honest. McMillan suggests being honest with your kids, which could mean saying things like, “We want to help you, but our resources are limited,” “We don’t want to sacrifice,” or “We’re suffering as a result.”
-
Ask for contributions. If an adult child is living at home, ask for money toward rent, even if it’s a nominal fee. This can be a way to help them while encouraging their financial independence, McMillan says.
-
Set limits. McMillan suggests setting a benchmark—such as until your adult child has a certain amount of savings in the bank, or a set number of additional months. Then, when that limit is reached, your financial help ends.
-
Provide other support. You can provide mental and social support instead of financial help, McMillan says. This could include things like helping them look for a less-expensive place to live.
Whichever route you take when discussing money and setting boundaries, the key is “to be supportive and not confrontational,” he says.
Remember, there is a limited amount of time to save for retirement, so prioritize it as well as you can, given your financial situation. And while parents may feel obligated to help their adult children financially, it’s also important for adult kids to make their own good decisions, including financial ones. As a parent, that means prioritizing and learning to be comfortable saying “no,” McMillan says. “That can be the hardest word to say.”
About the expert
|
Why trust us
At Reader’s Digest, we’re committed to producing high-quality content by writers with expertise and experience in their field in consultation with relevant, qualified experts. We rely on reputable primary sources, including government and professional organizations and academic institutions as well as our writers’ personal experiences where appropriate. We verify all facts and data, back them with credible sourcing and revisit them over time to ensure they remain accurate and up to date. Read more about our team, our contributors and our editorial policies.
Sources:
- Savings.com: “Percentage of Parents Financially Supporting Adult Children Reaches a Three-Year High”
- Michael McMillan, PhD, professor at the University of Maryland’s Robert H. Smith School of Business and co-director of the university’s Financial Wellness Center; Zoom interview, April 18, 2025
