Helping Adult Children While Saving for Retirement

By: John Ludlow, CFP®, Vice President, Senior Financial Planner
Studies show that up to 79% of parents will need to provide financial assistance to their adult children at some point in their lives.¹ Often this help is a one-time gift or loan to get a child through a rough patch such as a job loss or other long-term setback. 

Helping Adult Children
While it’s extremely generous to help your adult children when they’re in a financial bind, your support could impact and pose risks to your retirement goals—especially when you don’t see an end to your generosity in sight. 

Perhaps you find yourself torn between what you want to do and what you can do in this situation. First, evaluate your ability to help your adult child, who may end up needing your assistance on a long-term basis. This important evaluation step should be performed without your child’s input and completed before you dole out any money. 

If you feel you are struggling to be objective in your decision, rely on your financial plan or financial advisor for guidance. Both options can you give you an unbiased look at what help you can—and cannot—afford to provide. 

The Gift That Keeps on Giving

If you decide you can provide financial support to your adult child, it’s time to set the parameters for the assistance you’re able to give. Even more important, you need to clearly communicate the following stipulations to your son or daughter so everyone is on the same page regarding the extent and boundaries of the money you are giving. 

AMOUNT: Have an open, honest discussion about how you arrived at the amount of support you’re willing and able to give. Hopefully, this amount fits within your established budget. (Any amount over and above your typical budget should be closely evaluated to ensure your long-term goals are not jeopardized.) Once the cash portion of your support has been disbursed, do all you can to avoid exceeding your maximum commitment.

METHOD: Will the financial support you offer be a one-time gift or loan? Lump sum or monthly support? This is also an opportune time to discuss and determine other forms of help you’re willing to offer over and above cash payments. For example, will your child need to move back home to live with you? Do you want to offer budgeting assistance or financial coaching? All methods on the table should be clearly communicated to set the proper expectations.

TIMING: Perhaps the most important detail to discuss with your adult child is how long you’re willing and able to help. Setting a clear deadline for this financial arrangement is extremely important—open-ended time frames can lead to unsustainable time periods, erode your child’s ability to become self-sufficient, and ultimately put your retirement plan in jeopardy. Once you structure a time frame, revisit the deadline often and make sure your loved one sticks to it!

PURPOSE: One of the more challenging parts of a support plan is relaying to your son or daughter exactly what your support is designed to accomplish. In other words, your help is intended to support life’s necessities, not a particular lifestyle. “Support” means keeping a roof over your loved one’s head, food on the table, and clothes on your child’s back. People can have very different interpretations of what constitutes wants vs. needs. It’s best to agree on these values before you hand over any money. 

RESPONSIBILITIES: Support plans tend not to work well unless you outline the responsibilities that come with your help. For example, one easy requirement might be for an unemployed child to actively seek employment or to help out a few hours a week in the family business. More difficult tasks may have to include downsizing a home, trading in an expensive car, or giving up high-priced entertainment or travel.

Providing financial help to your son or daughter will redefine both of your roles in the family. In order for this situation to work, you’ll need to make sure your child stays on track to revitalize his or her financial life. In return, your son or daughter has to keep up their end of the bargain and do the same. Doing so likely will change the dynamics of your relationship, especially if your child has been away from home for a while. But the more you can communicate and work together toward the end goal, the better chance you’ll have to maintain a good relationship based on mutual respect after your financial help is no longer needed. 

Remember, the ultimate goal is to get your adult child back on track, financially and otherwise. While it may be challenging to monitor the responsibilities that go hand-in-hand with that task, just remind your loved one the more work put into your arrangement the quicker he or she can be free from your support and return to a self-sufficient lifestyle. 

Contact us today to learn how Commerce Trust can help you support your family members through difficult financial times without jeopardizing your retirement dreams. 

¹Source: Merrill Lynch report The Financial Journey of Modern Parenting 
²Source: ©2017, Harris Poll®, “Key Findings – Providing Financial Assistance” Summary, Harris Insights & Analytics. All rights reserved.
The opinions and other information in the commentary are provided as of February 2, 2021. This summary is intended to provide general information only, and may be of value to the reader and audience. 

This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such. 

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. 

Commerce Trust is a division of Commerce Bank. 



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John Ludlow, CFP® Vice President, Senior Financial Planner Commerce Trust
John is a financial planner for Commerce Trust. He is a member of the financial advisory services team, a dedicated financial planning practice within Commerce Trust that provides objective financial advice to clients.

Following a thorough assessment of a client’s unique situation and thoughts regarding wealth, John develops holistic and coordinated plans to help clients meet their short-term and long-term goals as well as take full advantage of various planning, tax and investment strategies along the way.

John has nearly 25 years in the financial planning industry, working with both individual and institutional clients. John received both his bachelor of science in business management and master of business administration degrees from Brigham Young University. He has also earned his CERTIFIED FINANCIAL PLANNER™ designation.