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For many parents, the cost of raising children doesn't stop when they turn 18. According to Merrill, 79 percent of parents provide some financial support to their adult kids. Among the parents of adult children ages 18 to 34, 60 percent pay for some or all of their kids' groceries, 47 percent help with car expenses, and 36 percent help pay the rent or mortgage. With these expenses adding up, figuring out when to cut the financial cord is especially important.

There are good reasons to offer financial help to adult kids - paying some bills can help them pursue an education, recover from a health crisis, or move to a city with better career opportunities. But if that support continues year after year, it can have a negative effect on your finances. Borrowing money to help your adult children or failing to save for retirement because you're spending money on them are both warning signs that your monetary support may be holding you back from pursuing your own financial wellness.

Is This the Right Time to Cut the Financial Support?

In order to decide when to cut the financial cord, ask yourself these questions:

  • Are your adult children capable of supporting themselves?
  • Have your children reached milestones in which they no longer need the same help anymore? Examples include graduating from college or getting a full-time job.
  • Have your adult children said that they want more independence?
  • Is financially supporting your adult kids making it hard to pay your own bills or preventing you from saving for retirement?
  • Is money causing tension in your relationship?

If you've answered yes to any of these questions, it's likely that the time has come to end some of your financial support.

How to Cut Financial Ties

In order for your adult kids to experience financial independence, you'll likely want to stop contributing to their rent, utilities, car payment, student loans, or insurance. If you've cosigned loans or credit cards for your kids, you'll need to have yourself removed from those accounts. You can do this by filling out a form to release yourself as a co-signer if the creditor agrees or by transferring the balance to a new card under your child's name only. Your child can also consolidate debts in their name so that they have a manageable payment schedule going forward. If you've cosigned for an apartment, you can ask to be removed from the lease, but you may need to wait until the lease is up as not all landlords will agree to remove a co-signer.

Try to give your kids as much warning in advance as possible. Ideally, you'll sit down to discuss the change and why it's taking place. This gives them time to understand your decision and to make other arrangements, like looking for a better job or moving to a less expensive apartment.

There are some minor benefits you might give your kids that don't make much difference to your bottom line. For example, you may keep your kids on your Netflix or Hulu account, or include them in your family phone plan to avoid extra charges. It's up to you whether or not to keep these arrangements in place. On the one hand, removing your kids from all of these accounts allows them to make a totally fresh start and take responsibility. On the other, keeping these accounts allows you to provide a small amount of help without significantly affecting your finances. You could also choose to give your adult kids a small cash gift around the holidays if you want to offer a little help while still allowing them to be independent.

Finally, let your kids know that cutting financial ties doesn't mean cutting all ties. You'll still love them and support them emotionally, just not with your checkbook. Plan to stay in touch through visits, phone calls, video conferencing, or texting. You'll find new ways to show you care that don't require giving up any money.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

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