The Bank of Mom & Dad: A Conversation Every Family Should Have
Why Graduation Is a Financial Turning Point for Parents
Graduation season carries a great deal of emotion — the pride, the celebrations, and the sense of a chapter closing. But alongside those milestones, something financially significant is happening for many families: a recurring tuition expense is coming to an end.
According to the Education Data Initiative, the average annual cost of attendance at a public four-year university is $27,146 for in-state students and $45,708 for out-of-state. At private nonprofit institutions, that figure climbs to $56,628 per year.¹ For families who have been absorbing those costs, graduation creates a meaningful shift in monthly cash flow.
The real question is what happens next. Is that recovered cash flow redirected with intention — toward retirement savings, financial goals, or long-term security? Or does it quietly get absorbed into lifestyle expenses or continued support for adult children? In our experience, the families who approach this transition with a clear plan are the ones who come out ahead.
How Much Are Parents Actually Spending on Adult Children?
The data on parental financial support is striking — and the trend is accelerating.
A 2025 report by Savings.com found that half of all parents with adult children now provide regular financial assistance, up from 45 percent just two years prior. The average monthly contribution is $1,474, a three-year high.² Common areas of support include groceries (83 percent of supporting parents), cell phone bills (65 percent), and vacations (46 percent). For parents of Gen Z adults aged 18 to 28, monthly support averages $1,813.²
A November 2025 AARP survey of adults aged 45 and older found that 75 percent are financially supporting at least one adult child, with average annual contributions of approximately $7,000. Notably, 53 percent of those adult children were reportedly capable of meeting their basic needs with money left over.³
The impact on parents is real and measurable. Forty-two percent of supporting parents report financial stress, and 35 percent report emotional strain. Nine percent have adjusted their retirement plans as a direct result of supporting their adult children.³
Perhaps most telling: working parents who support adult children contribute more than twice as much per month to their grown children ($1,589) as they contribute to their own retirement accounts ($673).²
These numbers are not shared to judge generosity. Every family’s situation is different. But they do underscore why clarity around financial support — and a plan for the post-tuition transition — matters so much.
What Financial Conversations Should Families Have at Graduation?
Graduation creates a natural opening for conversations that might otherwise feel awkward. The shift from student to working adult is a moment when both generations expect things to change — which makes it an ideal time to establish clear financial boundaries. Not out of a lack of generosity, but out of a genuine commitment to the long-term well-being of the whole family.
Several questions are worth working through together:
- When does regular financial support transition from expected to optional?
- Which expenses will shift to the graduate’s responsibility, and on what timeline?
- What does the graduate need to understand about employer benefits — health insurance, retirement plans, and emergency savings?
- Have the parents communicated clearly what they can and cannot continue to provide without compromising their own retirement security?
These conversations don’t need to happen all at once, and they don’t need to be adversarial. According to Ameriprise Financial’s 2025 research, 96 percent of parents who work with a financial professional feel confident they can pursue their top financial goals, and 78 percent said their advisor helped guide decisions related to their adult children.⁴⁵ A structured conversation with a third-party perspective can make these discussions more productive and less charged.
What Should Parents Do With Recovered Tuition Cash Flow?
For a family that has been absorbing $30,000 to $60,000 per year in college costs, graduation represents one of the most significant cash flow shifts they may experience before retirement. Being deliberate about where that money goes can meaningfully change the outcome. Here are a few areas worth considering.
Retirement contributions. The 2026 employee retirement plan contribution limit is $24,500. For those aged 50 and older, a $8,000 catch-up contribution is available, bringing the total to $32,500. A new SECURE 2.0 provision allows those aged 60 to 63 to make a “super catch-up” contribution of $11,250, for a total of $35,750. For many families, the end of tuition payments is the moment when maximizing these limits finally becomes realistic.⁴
Roth IRA conversions. The years between the end of college payments and the start of Social Security or required minimum distributions can create a meaningful window for Roth conversions — particularly if income is temporarily lower or timing is flexible. Converting traditional IRA or 401(k) funds during this period may support long-term tax management and estate planning goals.⁶
Emergency reserves. Many families deplete their emergency funds during the college years. The post-tuition period is a good time to revisit the standard guideline of three to six months of essential expenses held in accessible savings.
Insurance review. If a graduate is on a parent’s health insurance, that coverage can continue until the end of the month they turn 26 under the Affordable Care Act.⁷ But this is also a natural moment for parents to evaluate whether their own insurance — including long-term care — is still aligned with where they are in life. Parents in their 50s and early 60s are generally in a favorable position to explore long-term care coverage, but that window narrows each year.
Estate document review. If the last child’s graduation coincides with an empty nest, it is also a useful trigger to revisit wills, powers of attorney, beneficiary designations, and health-care directives. Family circumstances and financial situations change, and these documents should reflect where things stand today.
What Does the Graduate Need to Know?
While the primary focus of this transition is often on the parents’ financial picture, it is also an opportunity to set the next generation up well. A few areas where clear guidance can have an outsized impact:
Employer benefits enrollment. Many new graduates will make decisions in their first weeks of employment about health insurance, retirement contributions, and other benefits. Understanding the basics of employer matching, contribution rates, and plan options matters. Even a modest initial contribution provides flexibility to increase it later — whereas contributing nothing may mean waiting until open enrollment the following year to get started.
Health insurance transition. Graduates can remain on a parent’s plan until age 26, regardless of marital status, employment, or living arrangement.⁷ If the graduate’s employer offers coverage, it is worth comparing options. When they eventually age off the parent’s plan, marketplace plans — including Silver-level options — are available.⁸
Building credit and emergency savings. Establishing a credit history through responsible use of a credit card and beginning to build a modest emergency fund are foundational steps. Habits formed early tend to compound over time.
How a Financial Professional Can Help
The graduation transition touches many areas at once: cash flow planning, retirement projections, investment decisions, insurance review, and family communication. Addressing them in isolation often means missing the connections between them.
At St. Johns Asset Management, we help families think through what their financial picture looks like once tuition ends, identify where recovered cash flow can do the most work, and facilitate family conversations about financial support in a way that feels structured and clear rather than emotionally charged. We also help new graduates understand the long-term impact of early-career financial decisions.
If your family is approaching a graduation milestone — or if you are already supporting adult children and wondering how to balance generosity with your own retirement security — this is exactly the kind of conversation we are built for. The best time to plan for this transition is before the last tuition check is written.
We offer independent, fiduciary guidance grounded in logic and long-term partnership. If you would like to explore what this looks like for your family, we are here.
Sources
¹ Education Data Initiative, “Average Cost of College,” September 2025. https://educationdata.org/average-cost-of-college
² Savings.com, “Percentage of Parents Financially Supporting Adult Children Reaches a Three-Year High,” March 2025. Annual survey of 1,000 parents of adult children. https://www.savings.com/insights/financial-support-for-adult-children-study
³ AARP Research, “Parenting Longer: Parents Are Extending Support to Their Adult Children for Longer,” November 2025. Nationally representative survey of 1,744 adults aged 45+ conducted by NORC at the University of Chicago. https://www.aarp.org/pri/topics/work-finances-retirement/financial-security-retirement/midlife-adults-supporting-adult-children/
⁴ Internal Revenue Service, “401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500,” November 2025. https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
⁵ Ameriprise Financial, “New Ameriprise Research: Parents Balance Retirement and Supporting Adult Children Financially,” 2025. Survey of 3,000+ American parents. https://ir.ameriprise.com/news/news-details/2025/New-Ameriprise-Research-Parents-Balance-Retirement-and-Supporting-Adult-Children-Financially/default.aspx
⁶ Roth IRA note: Once you reach age 73, you must begin taking required minimum distributions (RMDs) from traditional IRAs and 401(k)s in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10 percent federal income tax penalty. To qualify for tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a 5-year holding requirement and occur after age 59½. The original Roth IRA owner is not required to take minimum annual withdrawals.
⁷ HealthCare.gov, “Health Insurance Coverage for Children and Young Adults Under 26.” https://www.healthcare.gov/young-adults/children-under-26/
⁸ ValuePenguin, “Health Insurance at Age 26: Leaving Your Parent’s Plan,” 2025. https://www.valuepenguin.com/health-insurance-age-26