By Brian Bloxom, ChFEBCSM
Taking care of your children is one of the most important things a parent can do. After a certain age, you probably assume you’ll no longer need to provide for them. However, unforeseen circumstances or unexpected events may put your adult child in a financial bind.
The COVID-19 pandemic caused a boomerang effect, with many adult children returning home in need of financial help. And it hasn’t gotten much better, with 67% of adult children still living at home with their parents. (1)
The good news? You may be able to support your children financially without sacrificing your retirement plans. Here are 4 ways to prioritize your financial future without hurting your own.
1. Talk Openly
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. Provide 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. Teach Them the Basics
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.
At Sentinel Wealth Partners, we believe it’s never too late to get your finances in order. Your position is unique. We’re here to help you ask the important questions, whether you want to check on your progress toward retirement or help your child create a foundational financial plan.
Reach out to us today by calling our office at 703-832-0164, sending an email to [email protected], or using our online calendar.
About Brian
Brian Bloxom is an Independent Financial Advisor, Chartered Federal Employee Benefits ConsultantSM (ChFEBCSM) and Chartered Retirement Planning Counselor℠, CRPC® professional with 25 years of experience in financial advising. He founded Sentinel Wealth Partners to serve retirees, individuals approaching retirement, and individuals managing complex retirement plans such as company plans or federal benefits plans. His expertise and dedication to helping his clients achieve their goals make him a trusted resource that will help you feel confident in your customized retirement plan. Brian’s mission is to be available to his clients—all the time. He’s here to solve your problems, relieve your anxiety, and give you optimism for retirement. Because ultimately, your retirement should be about well-deserved enjoyment, and not about stress or anxiety. When he’s not working, you can find Brian spending time with his wife, Jessica, and their two sons, Spencer and Preston. He enjoys coaching soccer, serving in his community, golfing, and relaxing at his vacation home at Lake Anna, VA. To learn more about Brian, connect with him on LinkedIn.
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(1) https://www.cnbc.com/2022/09/06/many-pandemic-boomerang-kids-still-live-with-mom-and-dad.html