Financial advice: Don’t sacrifice your savings to support adult kids

Half of American parents with adult children say supporting their grown kids has jeopardized their retirement savings, with more than 17% saying it has as significant impact. This is according to a new report from Bankrate.

Ken Kamen, president of Mercadien Asset Management in Mercer County said the problem with dipping into a retirement and savings account to help an adult child is that a parent is going to likely live longer than expected thanks to the wonders of medicine. So a parent is going to need that money down the road.

He said parents will often blindly help an adult child out of guilt or some sense of parental responsibility.

According to Bankrate, 19- to 23-year-olds are the most common ages for a parent-funded lifestyle to be expected to end. Millennials believe the cut-off age should be delayed in many cases while Baby Boomers believe the earlier the better.

So when should a parent cut the financial cord? Kamen said that's a tough question to answer but a parent needs to have a plan.

"It's important to set some good expectations before you start paying for things like rent, a car payment or insurance payment."

But when a parent does not set expectations, it's difficult to pull the rug out from under an adult child because then a parent really is putting that child in a very bad financial situation.

Kamen said if a parent is going to support an adult child, it's important to set parameters and they need to understand what a parent's limits are and how long that help is going to last.

A lot of parents help kids with a down payment on a house. Kamen said that's not a bad thing, especially if the parents have the money.

"But it's the drip, drip, drip of helping out with mortgage payments or car payments or insurance payments or if they get behind on their credit card bill. The parent says well you're not going to be paying 18% on a credit card so I'll lend it to you and you'll pay me back," said Kamen.

He said it might sound cold but the best thing a parent can do for their adult child is not help them financially because a parent is keeping a crutch beneath them that won't be there forever. At some point, a parent is going to need that money for their own retirement.

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