How parents can find the right time to cut the financial cord with their adult children

Mary Jo Katras talks responsible spending with her daughters so often, she elicits a familiar reaction.

"My kids are always rolling their eyes at me and saying, 'Yes, Mom, we understand the difference between needs and wants,'" she said.

The fact that "adulting" is now a verb reflects the quandary many parents face in whether to provide grown children with financial support or a push toward personal responsibility.

Katras learned that balance on the job as a program leader for the University of Minnesota Extension Department of Family, Health and Wellbeing. She has discussed money with her daughters — aged 14 to 20 years old — from the time they were young to set expectations of financial independence early.

More than two-thirds of parents of young adults have made or are currently making a financial sacrifice to help them, according to a Bankrate.com survey of more than 2,000 adults last month. Parents say they sacrificed retirement savings (43%), paying down their own debt (49%), emergency savings (51%) or reaching a financial milestone (55%).

Meanwhile, many baby boomers believe adult kids should gradually pay their own bills from ages 19 to 22 vs. Gen Z's preferred range of 21 to 24 years old, the survey said.

Here is some advice for how parents and children can navigate that divide:

Face the hard truth

The COVID-19 pandemic contributed to stalled adulthood, as many families formed quarantine bubbles. Pew Research Center, based in Washington, D.C., reported in July 2020 the majority of young adults lived with their parents for the first time since the Great Depression.

Meanwhile, more than two-thirds of adults Pew surveyed in 2019 believed children should be financially independent by age 22. But the percentage who were was only 24%.

While wages haven't kept pace with costs in recent years, Shoreview psychologist Jack Stoltzfus believes boomer and Gen X parents are more tied up emotionally with their children than previous generations, so they shy away from setting financial boundaries.

"I think it is a problem if the financial support you're giving to your young adult creates greater dependency than independence and self-sufficiency," he said.

Some frustrated parents of unmotivated 20-somethings seek professional help to jumpstart their kids into adulthood. In other cases, financial advisors initiate the conversation with clients.

Not all parents are receptive.

"A tough conversation for me is to say, 'Hey, you have to stop supporting your adult kids,'" said Grant Meyer, a financial advisor and founder of GTS Financial in Bloomington. He recalls former clients who, against his advice, took out six figures of student loan debt they plan to pay into their 70s on behalf of their adult kids.

Find the right mix

Experts agree reasonable financial support can include allowing an adult kid a stint living at home, covering health care and sharing family meals together.

For parents trying to motivate their adult children who've moved back home, University of Minnesota professor and financial behavior expert Joyce Serido recommended refusing to cover clothes, cell phones, credit cards and other monthly bills.

"You can't make them get a job," she said. "But you can stop the welfare checks."

Stoltzfus advises parents to ask themselves three questions before offering money: Is this a need or a want? Am I acting primarily out of love and not fear, anxiety or shame? Am I acting in line with my principles?

Learn to say no

Don't do everything for adult kids. If you want to help your son or daughter buy a car, offer to match a portion of the purchase price.

"That keeps them with skin in the game, and I think they're more likely to be self-sufficient in doing that," Stoltzfus said. "If I just buy the car for them, they don't have any skin in the game."

After witnessing parents doing too much for adult kids, Meyer, the financial advisor, agreed.

He describes his typical clients as similar to "The Millionaire Next Door," hard workers who saved and never lived beyond their means. Some who've amassed this wealth face guilt about not assisting adult kids more.

"From my experience doing this 15 years," Meyer said, "the clients that I saw that continued to enable and financially support the adult children, it didn't benefit the children."

Affluent parents feel the most pressure as they rationalize giving extravagant gifts now since their children will inherit their money anyway when they die, Serido said.

Encourage action

If young adults fail to attain a sense of responsibility and self-discipline in their 20s, it's very difficult to begin to acquire that after age 30 and even more so after 35, based on research Serido has studied.

Stoltzfus sees parents tiptoe around their adult children with anxiety or depression for fear of making it worse. But plodding along in a failure-to-launch cycle can push a young adult into an even bigger tailspin.

"I think the answer is get them help for their mental health and challenge them to step up: get a job, take classes, volunteer, exercise," Stoltzfus said. "Just sitting here is not a reasonable option."

When frustrated parents contact him with extreme failure-to-launch cases, he helps them develop a joint agreement but starts by counseling the parents and adult kids separately to begin establishing a five-year plan.

"I've never had a young adult say, 'I want to be living at home with Mommy and Daddy,'" he said.

Even young adults with disabilities are often able to work and, in some cases, live independently from Mom and Dad, he said.

Katras believes she's set the right tone toward her children becoming self-reliant, with one daughter in college who earns her own spending money and who will be responsible for her own student loans.

There will be conditions if the daughters move back home after graduation.

"If it's a situation where there's no motivation, there might be some tough love," Katras said. "There would have to be a timeline, and then, you're out."