Baby boomers could end up $227,000 richer if they stop bankrolling their adult children

Parents who pay for their adult children might be hurting their retirement.
Paying for their children's expenses could cost parents up to $227,000 in retirement savings, according to a NerdWallet analysis.
Parents need to figure out whether they can afford to pay for their adult children. If not, they should ask their kids to start pitching in.

Parents sometimes pay for their adult children's expenses — and it could be hurting their retirement.

In fact, they might be missing out on a quarter of a million dollars in retirement savings by supporting their adult children, according to an analysis by NerdWallet.

Eighty percent of parents with adult children are paying or have paid for at least some expenses for those children after age 18, according to a survey on the spending and saving habits of US adults by Harris Poll on behalf of NerdWallet.

Looking under the hood of that data, the survey found that parents of adult children were paying or had paid for the following:

The two most expensive costs are living expenses and college tuition. And parents' retirement savings could be $227,000 higher if they chose to save that money instead of spending it on their children' living or schooling expenses, NerdWallet found.

Andrea Coombes, a retirement and investing specialist at NerdWallet, said parents should run the numbers to figure out whether they can actually afford to help their children with their expenses.

"Parents who need to ramp up their savings rate should have a conversation with their children," Coombes said. "Parents can let their children know they're at risk of financial insecurity later in life and they don't want to be a burden to their children.

"And parents should ask their adult children to start pitching in on some of these expenses. It'll be good for the parents' retirement, plus it models to the children the importance of budgeting, saving, and planning for the future."

To figure out the projected savings, Nerd Wallet found the average of all those costs and calculated the potential impact on the parents' retirement savings if they paid for their adult children's bills for one, three, or five years. They assumed that the parents would put that money into a retirement savings account like a 401(k) or an IRA instead of spending it on their kids.

Interestingly, over half of all adults surveyed (meaning, not only those with adult children) said they felt confident they were contributing enough to their retirement savings. And almost a quarter of parents saving for retirement expected their children to help them financially in some way after retirement.

Helping adult children foot the bill might not necessarily hurt parents in retirement, if they can afford to pay for everything. But if paying for college, the phone bill, and groceries comes at the expense of retirement savings, parents will feel the pain in retirement.

"As parents, we tend to want to do everything we can to help our children succeed," Coombes said. "But sometimes we focus on the present at the expense of the future."