Generosity shown to adult children, though well intentioned, can put parents’ future financial security in danger if it comes at the expense of preparing for their own retirement.
To avoid such an outcome, it’s important to strike the right balance between assisting their grown kids financially and saving for retirement. Here are some tips for achieving that balance:
Foster financial independence
Teach children the concept of earning, budgeting, and investing as early as possible—say, by giving them an allowance when they are younger or having them get a job when they are older. This will lessen the odds of them having to rely on the Bank of Mom and Dad as they grow up.
Have a plan
If providing financial assistance to your adult children is a priority, incorporate it into your planning process. See the support you expect to provide as a goal, just like retirement, and don’t be afraid to set a limit on how much you are willing to give.
Encourage them to play a role in college funding
When it comes to funding their college costs, kids can use their own earnings, apply for scholarships or grants and, if necessary, borrow. In retirement, those choices aren’t available to support you. So, set up a plan that includes contributions from your children, and when they are in their early to mid-teenage years let them know what you expect them to chip in.
Set clear expectations
Communicate with your children as to how much financial support you plan to give them, if any, in their adulthood. If you’re not in a position to help your grown kids financially, don’t be afraid to tell them.
As a parent, you want to help your children financially, but be careful not to do it at the expense of securing your own retirement. Keeping your future on-track can help you keep your retirement plans realistic, while allowing your children to build financial independence—a priceless gift from you to them.
For more information, please read:
Financially Supporting Your Adult Children? Don’t Let It Jeopardize Your Retirement | Kiplingers