By Cheryl Winokur Munk
July 30, 2025
Think you are off the hook financially when your children graduate from college and get a job? Think again.
Many parents are helping out with rent, utilities and food. Some are canceling plans to downsize because they have adult children unexpectedly still living at home.
Half of parents with adult children surveyed by Savings.com say they provide regular financial assistance to their grown children. On average, they’re spending $1,474 a month per adult child, a three-year high and about 6% above last year, according to the site that helps consumers save money on everyday items.
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For many parents of children who are nearing young adulthood, “the reality is you don’t know whether they are going to need your support,” says Stephanie James, senior financial adviser with Wescott Financial Advisory Group in Philadelphia.
But it doesn’t hurt to start planning for the possibility. Here are some strategies parents could consider.
Amass liquid savings
Some advisers suggest that parents fund an extra bucket, just in case they have to keep financially supporting a child. This should be in addition to budgeting for the usual big-ticket expenses like college education and their own retirement. A taxable investment account, for example, doesn’t have the same withdrawal restrictions as a 401(k) or IRA, so funds from it can be directed to adult children, retirement, grandchildren or another purpose.
If they don’t end up needing that money, no harm done.
“The goal is to beef up their liquid savings so they have a cushion,” says Corey Briggs, director of wealth planning at Plaza Advisory Group in St. Louis.
Briggs offers the example of a client whose son began suffering from depression during college. His parents are paying for a facility using funds they saved in a taxable investment account. “Things do come up,” Briggs says. “It’s just an easier way to have flexible money available for things that arise.”
Ideally, this money should be set aside and not touched for many years, says James, the Philadelphia adviser. Even if you can only save $1,000 a year and invest it for 30 years, assuming a 6% annual return you would have over $80,000 at the end of that time, she says. “Putting it in a savings account is good, but when you invest it, you’re thinking longer term,” she says.
Open an HSA
A health-savings account can be another good way to sock away extra money, says James. While the primary purpose of these tax-advantaged investment accounts is to help pay healthcare bills—withdrawals are tax-free when used to pay qualified expenses—money left over at the end of each year continues to grow, building a pot separate from other investments. If money is needed to help with an adult child, a parent can withdraw money from the HSA and pay taxes on it (plus a penalty if they are under the age of 65).
You can contribute to an HSA if you have a high-deductible healthcare plan. Contributions are pretax, offer tax savings during the year of the contribution, and investments grow tax-free. For 2025, families can set aside a maximum of $8,550 in an HSA.
Fund a variable universal life-insurance policy
Some financial advisers recommend that one parent take out a type of life-insurance policy known as variable universal, which combines investment features with a lifelong death benefit.
The cash value in the account can grow or shrink over time based on stock-market performance. It can also be used to pay for expenses, says Misty Garza, vice president and financial adviser in the Woodlands, Texas, office of Bogart Wealth which is based in McLean, Va. The accumulated cash value grows tax-deferred, and in many cases, you can withdraw money tax-free, though it is advisable to speak to a tax professional since rules can be complicated.
Insurance-policy costs can vary depending on the carrier and the policy specifics. It is good to review the internal costs associated with each policy you are looking at to determine which one most effectively meets your needs, Garza says.
Another benefit is that a cash-value life-insurance policy is not considered an asset when it comes to applying for federal financial aid for college, though it might be considered for nonfederal aid. How large a policy a parent should purchase depends on factors such as premium affordability and how the cash value could be used in the future, Garza says.
Consider buying real estate
For parents who have some financial flexibility, and are concerned about their children being able to afford housing, Nicholas Yeomans recommends looking into purchasing an investment property.
Yeomans, president and chief compliance officer of an investment advisory firm in Marietta, Ga., says he works with a couple who used the husband’s bonus to buy a single-family house as an investment property. They are renting out the house and plan to make it available to their preteen son after he graduates from college. He could decide to live there and help maintain the property, and if there are roommates, they could share in the rental income, Yeomans says.
If the son doesn’t need the house, the parents will have benefited from the rental income for multiple years and can, eventually, sell the house, hopefully for a sizable profit, he adds.
Families who go this route often opt to buy real estate in a familiar place where they know the market. If the child doesn’t want to live there ultimately, the parents may consider swapping the investment property for other real estate in a transaction called a 1031 exchange that allows capital-gains taxes to be deferred. This could be appropriate if they want to look for additional real-estate investments that often come with tax-advantaged income opportunities, says Yeomans.
There can be other options as well. Yeomans cites the example of a client who had built equity in a real-estate investment, but the child was getting married and moving to another state. The client took out a home-equity line of credit on the property and gave some of the equity to the couple toward a down payment on their new home.
Cheryl Winokur Munk is a writer in New Jersey. Email her at reports@wsj.com.
This Wall Street Journal article was legally licensed by AdvisorStream.
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