Supporting Adult ChildrenSubmitted by Mission Financial Planning on September 10th, 2020
Grown kids living at home and “sponging” off their parents (receiving financial help) is often the subject of sitcom humor, but in the right circumstances it can actually be helpful. This post is to help parents know what and how much is helpful, and when you might cross the line with “help” that keeps kids from maturing and becoming independent, functional adults.
The most helpful kinds of support are grouped in the literature under the term “scaffolding”. Scaffolding is defined as temporary support that contributes to the child’s human capital or the achievement of specific socioeconomic goals. For example, parents might provide scaffolding when they pay for college, rent while the child attends graduate school or help with living expenses so the recent graduate can take a lower-paying foot-in-the-door job. Tuition and school-related scaffolding allows a student to limit their work hours and attend school full time, and has been shown to lead to quicker graduations. Supporting college education in the early years of adulthood provides the most substantial benefit for the parental investment (the best Return on Investment).
During the COVID shut-down many adult children moved back home and worked or attended college online from their parents’ home to stay safe and save rent. When it works, adult children who live at home can increase their living standards, reduce debt, and/or acquire more education during that time.
Scaffolding is usually intended to help kids transition from adolescence to adulthood, so parents who are especially keen on encouraging self-sufficiency don’t mind this type of support.
The right kind of support (scaffolding) of kids in their 20’s results in better incomes and/or human capital in their 30’s.
Another type of support is described as a safety net, which describes the occasional financial help provided by parents during difficult circumstances. If a child lost their job and needed temporary funding, a parent might provide short-term financial help or invite them back home. Moving back home can prevent or mitigate the financial problems created by a changing economy, such as job loss, or reduced or inadequate income, however, providing safety-net support did not have the same “return on investment” as supporting education.
How much is enough? The first concern should be how the support affects the financial health of the parents. In a recent survey parents of all socioeconomic levels were supporting their adult children at a level of around 10% of their annual incomes, but don’t risk your own ability to support yourself or jeopardize your retirement to provide support. Secondarily, don’t support your child to the extent that it turns into enabling (supporting bad financial habits or decisions) or even worse, enmeshment (over-involvement in the financial relationship).
For how long? Longer term support doesn’t correlate with an older child’s (age 31 – 32) economic attainment. The vast majority (up to 75%) of 18 to 28 year olds receive some sort of financial support from their parents but the number declines to about one-third when adult children reach the ages of 31 to 32. The norm would indicate that support should reduce over time, and that by their late 20’s most kids should be self supporting.
The “acceptability” of parental financial support varies, depending on whether or not young adults have moved out of school, live on their own, have entered the workforce, have married, and have become parents. One researcher showed that receiving repeated economic and housing support from parents during the time that maturing young adults are expected to be increasingly independent is not associated with improved earnings at age 31–32. The repeated financial help begins to sound like enabling, a type of support that is negative, and can prevent a child’s growth and independence.
Before doing research on supporting adult children my bias was toward getting kids to be independent as quickly as possible. I’ve had clients who admitted to feeling sheepish about the support they were still providing older children. But the research I have done has helped me distinguish between the parental support that is helpful and support that is not, and lets me and my clients feel less guilt about the appropriate support we are giving. My research indicates that the right kind of support can accelerate kids becoming independent, functional adults and increase their incomes and human capital.
This blog post contains excerpts from a research paper Sharon co-wrote, which was published in The Journal of Financial Therapy, which can be accessed by clicking here. She and her co-authors were invited to present the paper at the 2019 Financial Therapy Association conference and received the Best Paper of the conference; they have been invited to present again via webinar in 2021.
Set up a time to talk with Sharon about how you're supporting your adult children.