U.S. Parents Spend $500 Billion Annually on Adult Children

Parents in the U.S. spend a staggering $500 billion annually on their adult children — twice the amount they put into retirement savings, a new Merrill Lynch study shows.

Of all the stages of parenting, the empty-nest stage — when kids are over 18 — is the most expensive, according to The Financial Journey of Modern Parenting: Joy, Complexity, and Sacrifice, a joint study from Merrill Lynch and aging research group Age Wave.

“Empty nesting offers the chance to reduce expenses, spend more on leisure and save more toward retirement,” the report states. “However, those plans can get sidetracked when parents continue to serve as the ‘family bank’ for adult children.”


The study was conducted in June 2018, asking 2,500 parents aged 18 and older questions about their current phase of parenting. Of the parents with adult children, more than 79% reported that they financially support their adult children — especially during their college years — with 72% saying that they put their children’s interest ahead of retirement savings.

“One-quarter of parents say they are willing to take on debt and pull money from retirement savings,” the report noted.

Heather J.T. Evans, a wealth management advisor with Merrill Lynch, told RMD that financially supporting adult children can ruin a retirement plan.

“I have a client who delayed her retirement for a full eight years,” she said, adding that because the client’s son-in-law had medical and financial issues, her daughter’s family had to move in with her. “She had to work into her 70s to support this other family, and, as she said, she couldn’t say ‘no.'”

Of the $500 billion tab, $54 billion annually goes to groceries and food; and $18 billion to cell phone service, which most times is paid in full. Parents also helped with school bills and car payments. The $500 billion total did not include other common expenses, like weddings or contributions to first-home down payments.

“Today’s parents also regularly contribute toward adult children’s housing, car, and even vacation expenses,” the report stated.

Jamie Hopkins, a professor of retirement planning at the American College of Financial Services, gave RMD some insight into why someone continues to financially support an adult child at the expense of saving for their future. He said this “behavioral bias” is not necessarily irrational “as we know we will be around to enjoy it now and the future is less certain.”

“Money and finances are also just a means to an end,” he said. “The end goal is our happiness, which often includes our family’s financial stability. If we save for retirement, but our children are unhappy today, we are also unlikely to enjoy our lives.”

He added that the student loan “bubble and crisis” is contributing to this problem of adults needing financial assistance from their mothers and fathers.

For parents to get their adult children financially independent, Evans said parents have to have tough love.

“I think you have to sit down and have a heart-to-heart,” she said. “Look at the children’s expenses and give them a deadline.”

For people still planning for retirement, Evans said the number one thing to do is contribute the maximum to a 401(k).

“Pay yourself first,” she said.

Written by Maggie Callahan

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  • This is a tough subject to approach. Naturally every situation is different, There are many adult children that have physical or mental handy-caps. This is in a class all by itself, we can all understand a parents need to care on a forever basis in these cases.

    Then we have adult children who have suffered hardships, divorce, illnesses ETC. It is very understanding for a parent to be there to help and get there children back on their feet in-order for them to help them get back on their feet, into the workforce and be self sufficient!

    Then we have those children that are free loaders, they can’t keep a job or they are always wining how broke they are. In short, these are the adult children who have their hands out and pray on their parents!

    These are the children that need their parents to say enough is enough! Tell them they are capable of earning their own way in life and allow us to retire gracefully!!

    I blame those parents that give in and allow this to go on and on! I hate to say this but if the parents can’t control the situation, they deserve what they wind up with!!!

    John A. Smaldone

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