Besides providing love and guidance, taking care of your children financially is one of the most important things a parent can do. However, it is expected that after a certain age you will no longer need to provide for them. Putting your children’s interests ahead of yours is a natural instinct as a parent, especially since younger generations have to deal with student loan debt and increasingly unaffordable housing costs.
The pandemic has only made the situation worse. A survey from last year found that 45% of parents with adult children gave their kids money during the pandemic (ranging from around $1,400 to $8,500). And 79% of those parents said the money they gave would have gone toward their own personal finances. (1)
Supporting your adult children financially does not mean you should sacrifice your retirement plans. Here are 4 ways to prioritize your financial future without completely kicking your children to the curb.
1. Have a Heart-to-Heart
Kids of all ages are used to their parents taking care of their needs, so they may not realize their reliance on you is setting you back. Make sure you and your adult child are on the same page so that there aren’t unrealistic expectations. It might help your child if you are honest about your financial situation. Let them see the big picture so they understand the financial implications of their choices.
This will likely be a difficult conversation, but they’re adults…they can handle it! Be as specific as possible, explaining how your financial support has postponed your retirement date or forced you to dip into your 401(k). If your children are upset, remind them that by pursuing your own financial security, they won’t have the financial burden of supporting you later in life.
But don’t just tell them you’re cutting off financial support; give them the tools they need to succeed on their own.
2. Offer Non-Financial Support
Just because you’re halting the flow of money doesn’t mean you are cutting off all forms of support. You have decades of wisdom and experience that you can pour into them that will help them as they gain independence. Ask how you can be there for them moving forward. Could you help them look for a job? Offer to search for housing within their new budget? Maybe walk them through how to negotiate a raise at their current job? There are many ways to help your child without handing over the checkbook. Make sure they know you’re still there for them.
3. Equip Them With Practical Skills
Living within your means is easier said than done, but by teaching your kids how to budget, you give them a framework to make financial decisions and take ownership of their future. As young adults start their first full-time jobs and adjust to possibly living on their own or taking on more expenses, they need to learn how to look at the numbers and align their lifestyle with their income. This means ignoring society’s incessant messages that they need what everyone else has.
Setting a budget will help them stay on top of their debt, know where their money is going each month, and see how much they are saving. The first rule of financial security is spending less than you earn and saving the difference. If your adult child can master this, they’ll soon be on their way toward financial independence. While the parameters of a budget depend on an individual’s specific situation and goals, you can get your child started by giving them tangible examples of what it costs to manage a household and help them map out how they will divide their money among essential expenses, savings, debt payments, and non-essentials.
And since your adult children likely rely on technology for everything, encourage them to use a budgeting app to track their money and stay on top of their accounts.
4. Set Boundaries
Don’t want to cut your kids off cold turkey? Give them conditions on how long and under what circumstances you’ll continue to support them. They’ll learn nothing if you hand over money without a thought. But if you introduce conditions and set a clear path for getting them where they need to be, they’ll learn to be responsible.
These conditions might include treating the money you give them as a loan. If they need money for rent, create a contract for when they’ll pay you back and what they’ll owe you in interest, if anything. If your child is jobless and needs to move back home, set a time limit to how long they can stay and how they’ll contribute to the household. The bottom line is to make them earn the money you give them so they understand the value of it.
Get Your Retirement on Track
We know it can be hard to see your children struggle to make ends meet, and you may even doubt your decision to cut the money cord. But take comfort in knowing that you’ll still be there to emotionally support your kids every step of the way, just not financially.
And don’t forget that one of the best gifts is teaching your children how to manage money. When they set a steady course toward their own financial success, they are more equipped to live within their means and it helps you keep your retirement savings.
We at 1on1 Financial believe it’s never too late to get your finances in order, so whether you want to check on your progress toward retirement or your child needs some help setting a strong foundation, we are here to help. We take a holistic approach, working closely with you to craft strategies that align with your circumstances, and help you pursue your objectives and stay on track.
To see if we’re the right fit to help you secure your retirement, call our office today at 909-981-1720 or simply click here to schedule a free 15-minute introductory phone call!
About 1on1 Financial
1on1 Financial is an independent financial advisory firm specializing in guiding working and retired professionals, executives, and business owners along the path to financial well-being. Founded in 1997, we use a team approach to help our clients accumulate wealth, generate income, preserve their life savings, and strategically plan for the distribution of their estate. With more than 50 years of combined experience in the financial services industry, we remain true to our fundamental mission: to provide personalized guidance, treatment, care, and service so our clients can gain control of their future and feel confident in their financial life.