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In 2022, the share of nonretired adults who perceive their retirement savings as being “on track” hit a low of 31%, according to an annual survey from the Federal Reserve. Inflation and a bearish stock market likely played a role in the decline in retirement preparedness, along with a cultural shift that left many older adults supporting their adult children financially. 

During the pandemic, Pew Research Center found that young adults living at home had become the norm, with 52% of 18-to-29-year-olds living with their parents. It’s a trend that’s been culturally out of fashion since the Great Depression. To the boomer generation, it was shameful to move back home after college. 

But increasingly, young adults feel the decision makes financial sense, Bloomberg reports. That’s likely because today’s young adults are facing a harsh economic reality that makes it more difficult to achieve financial independence at a young age. 

Though many parents are sympathetic, assisting their children can require sacrifice. Indeed, according to a recent Credit Karma survey, 27% of parents have delayed their retirement plans to provide financial support, and 59% have experienced mental stress from their children draining their resources.

All this means it’s not uncommon to feel that retirement is out of reach in today’s economy—but there are ways you and your children can get ahead of the curve. 

The Plight of Young Adults

Young adults face significant barriers to independence. Between 1980 and 2019, higher education costs increased 169%, while wages for 22-to-27-year-olds have only risen 19%, according to a report from Georgetown University. Yet, college has become more necessary than ever. Postsecondary education is necessary for two out of three jobs today, compared to three out of four jobs in the 1970s. 

Young adults, especially those who don’t finish a bachelor’s degree, are also taking longer to obtain good jobs than their parents did. While the previous generation commonly secured good jobs by their mid-20s, even without a college degree, today’s young adults aren’t finding good jobs until their early 30s. Georgetown University defines a “good job” as one that pays a salary of $35,000 or more for adults under 45. 

Between rising rent and homeownership costs that have outpaced wage growth, more young adults are also finding it impossible to save for a home without financial support from their parents. If rising student loan debt weren’t enough, Gen Z dollars can purchase 86% fewer goods when compared to baby boomers in their 20s, according to ConsumerAffairs. And a home costs nearly double what homebuyers in the 1970s paid in 2022 dollars. 

To make things tougher, CoreLogic and U.S. Census data show that median-income earners now spend 40% of their gross income to rent a median-priced home, the highest share in decades, leaving little to put aside for a down payment. 

The good news is that by age 30, young adults are more likely to have a good job than their parents’ generation, according to Georgetown University research. In some ways, providing support for your adult children as they get started in their careers is an investment in the financial future of the entire family. Many parents hope that their children’s earnings will exceed their own and they’ll get support from their children during retirement. 

The Financial Burden on Older Adults

There’s no guarantee that today’s young adults will save enough in their later years to offset the sacrifices their parents made. A 2018 survey from Merrill Lynch and Age Wave found parents spend $500 billion on their adult children every year—while only contributing $250 billion annually to their retirement accounts. A significant 63% of parents say they’ve gone so far as to sacrifice their own financial security to provide for the needs of their children. 

The financial burden of assisting adult children is heaviest on the families least prepared for retirement. For example, the Brookings Institute studied a cohort of young adults whose parents weren’t college graduates and had incomes below 200% of the federal poverty line. Almost 60% of the group were still earning less than $20,000 annually at age 30. This indicates that adult children from low-income families require even more support to become independent of their already distressed parents. 

Over time, economic mobility has decreased, leaving only half of children born in the 1980s to earn greater incomes than their parents when they grew up, relative to 90% of children born in the 1940s. Many of the factors impacting retirement savings compound with each generation, widening disparities in retirement preparedness. 

In 2007, for example, about 1 in 5 low-income households getting close to retirement age had a retirement account balance, according to Government Accountability Office (GAO) research. By 2019, that number dropped to 1 in 10. To make matters worse, low-income earners tend to receive less retirement support from their employers. 

Making Retirement Work

However, there are strategies for improving upward mobility outcomes for your children, even if your own savings account balance is modest. 

In general, there are two ways to boost your savings: increase your income or reduce your spending. According to Federal Reserve data, adults aged 55 to 64 have a median retirement account balance of $134,000, which is only enough to fund about two years of comfortable retirement in most places. 

To beat that, you’ll likely need to earn greater than the median salary or spend less than the typical consumer. That’s the logic many young adults use to justify living with their parents—by significantly reducing their living expenses, they’re able to put more of their income aside. 

However, young adults who have never lived on their own often fail to account for the increased utility, grocery, cleaning, and maintenance expenses their parents incur with an extra person under their roof. Furthermore, offering your child a bedroom means foregoing a potential source of relatively passive income from taking in a tenant or vacation rental guest. 

All this means setting up a household budget and ensuring that everyone contributes is key to ensuring you don’t put your retirement at risk by helping your children. If your child is struggling to pay for even their own expenses, such as their car payment, health insurance, or student loans, you may need to help them establish a personal budget as well. Using digital tools from banking and credit card websites to analyze their current spending is a good place to start. 

Take steps to increase your child’s earnings as well. If they haven’t yet attended college, help them choose a major that will yield a high return on investment. If they’ve already attempted college and need a career change, consider training programs that cost less than a college degree. From tech boot camps to apprenticeships to healthcare certifications, there are many affordable options that can lead to a major increase in earnings. 

It may also help to coach your child on how to invest each dollar they put aside wisely. Financial literacy is an important predictor of investment success. The Federal Reserve found that people with retirement savings generally have higher levels of financial literacy than people who lack a retirement account. 

If your child doesn’t understand compound interest, help them open a high-yield savings account and monitor the results. Use online calculators to show the impact of retirement account contributions and employer matching. 

Furthermore, real estate investment can play a role in any family’s retirement preparation strategy. One way to boost your child’s savings while investing in your future is to team up on a house hack. House hacking typically involves renting a room or unit in a duplex while living in another room or unit of the same building. 

One advantage of house hacking is that your child can benefit from the financing options available to first-time homebuyers purchasing a primary residence. With low-down payment options available, a small contribution to your child’s homebuying fund can go a long way. Your child can also use the income from the rental to reduce their ongoing housing expenses, leaving them with more money to contribute to their own retirement or even provide you with some monthly cash in exchange for your help up front. 

That rental income can also act as a buffer to the career uncertainty that young adults face in their 20s. A setback like a job loss won’t necessarily mean that your child needs to sell their property and move back home—they can rely on that rental income, along with a temporary side hustle, to make ends meet. 

The Bottom Line

Before you risk everything to help your kids, remember that your own financial security is a precursor to aiding your children. There’s nothing shameful about a multigenerational household in today’s economy, but to avoid mental and financial distress, you’ll need a plan that’s likely to result in your child’s success. 

While giving them money for unnecessary expenses may do more harm than good, helping them develop a budget, pursue a career, and invest their savings wisely may improve their financial outcomes—and your own.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.