Is supporting your adult children hurting your retirement plan? 

6 practical ways to encourage financial independence

Supporting adult kids financially can be as small as paying for groceries, gas or cell phone bills – or as big as helping them out with a down payment on a home. While it’s natural for parents to want to help their children, it’s important to make sure kids don’t rely solely on the “Bank of Mom and Dad” and miss out on valuable life lessons. 

Just as importantly, providing financial support could jeopardize your own financial goals. 

Cutting the money cord can be difficult, but here are a few guidelines to help start your kids off on the path to financial self-sufficiency.


If your children are living with you, begin by setting expectations around when they will start paying for their own expenses like cell phone bills or car expenses. Remind them that it’s not that you don’t love or care for their wellbeing, but rather you want to set them up with good financial habits to provide for themselves. 

Create a timeline

Prepare your kids by giving them a reasonable timeline to organize their finances and emotionally prepare to fully support themselves. No matter how much financial assistance you’re giving your child, you’ll want to give them enough lead time to adjust to living without this support. If it’s just a few hundred dollars a month, a couple of months should suffice, but if you’re supporting them entirely, you’ll need to allow much more time to help them stand on their own two feet. Choosing a date and sticking to it makes it easier for everyone to follow through. 

Establish a budget 

Many people have no idea what their monthly expenses are – your kids are likely unaware what they earn and what they spend. Once you’ve helped them create a budget, you’ll be able to see what gaps exist, where they still rely on you and how you can help them reduce spending and increase savings. Be sure to review their budget together frequently in the first six months. There are many free apps and websites that can help your children budget and track expenses – talk to us for suggestions. 

Encourage early investing 

Saving earlier can help your adult children benefit from the power of compounding on their savings. Even small amounts invested regularly, whether through an RRSP or a TFSA can make a significant difference in their savings down the road. Starting to invest at a young age also helps your adult kids get into the responsible habit of saving and setting aside money for their future.

Help your kids get set up to file taxes 

For young adults who are filing taxes for the first time, the prospect can be daunting. The good news? At this stage in their life they are unlikely to have complex financial circumstances. There are also a host of simple, intuitive websites to help them work through the process, including, and

Model good financial habits 

Share how you learned to make financial decisions in your early years, and how you’ve learned from past choices. Let them know that if they stumble, it’s okay – it’s more important to focus on what they can control by creating an achievable action plan. 
Is your retirement plan on track? Talk to us to make sure supporting your adult children isn’t significantly impacting your financial future. 


Financial jargon 101

Helping your adult children become financially independent also means making sure they are financially literate. Here’s a quick list of some commonly used terms. (It might even be a good refresher for you). 

Dollar cost averaging

Rather than investing a large sum of money upfront, dollar cost averaging involves slowly investing small amounts of money (e.g. $50 a week) at regular intervals. This method spreads the cost of investing over time, averaging out your cost per unit/share. It’s a great way for new investors to get into the market. 


Compounding is when you invest money and then reinvest the interest you’ve made on that money to generate more savings over time. For example, let’s say you invest $1,000 earning 5% interest a year. In a year, you’ll have $1,050 (your original investment + interest). Earning the same rate of interest, you’ll have $1,102.50 the following year – 5% on $1,050 … and so on. Compounding is a powerful way to build your wealth over time. 

Dividend reinvestment plan (DRIP)

A similar concept to compounding, a DRIP is the reinvestment of cash dividends from a stock to purchase additional shares or fractional shares of the underlying stock.

Net worth

Calculating net worth is a simple formula: it’s the sum of your total assets minus the sum of your debts. Knowing your net worth gives you a snapshot of your finances and is a great starting point when you create a budget. 

Asset class

This is a group of securities or major investment categories that have similar characteristics; examples of asset classes include stocks, bonds, real estate, or cash.

Asset allocation

In simplest terms, asset allocation is the way in which asset classes are distributed within your portfolio to align with your goals and objectives. How much you choose to put in different asset classes depends on considerations like how long you have to invest (time horizon) and how much risk you’re comfortable with (risk tolerance).


Some investments will do well at times when others may not. Diversification reduces your risk by spreading your assets across the various asset classes. For example, instead of having one stock you should have many – and different types like large cap, small cap and international. You can diversify further by investing in different sectors (technology, healthcare) and different industries within those sectors. Different types of investments perform in different ways over time – diversification helps reduce risk and smooth out returns.