retirement

Financially Supporting Your Adult Children? Don't Let It Jeopardize Your Retirement

Parents need to learn to set expectations and limits ... for their children and for themselves.

Would you delay your retirement to help pay for your child’s college education? Surprisingly, 1 in 3 parents say they have or would be willing to do so, according to a recent study from Ameriprise Financial.

What’s more, these days many moms and dads are continuing to assist their children with expenses beyond college — footing the bill for everything from weddings to cars and first home purchases.

Such generosity, though well intentioned, could jeopardize parents’ future financial security if it comes at the expense of saving for their own retirement and other critical goals. And it could create a cycle of future financial headaches for the whole family. If parents run out of money later in life because they overspent on their adult children during their working years, they could be left in the undesirable position of relying on those same children for financial support. This burden could fall on adult children at a time when they need to focus on saving for their own retirement.

To avoid these unintended consequences, it’s important for parents to strike the right balance between assisting their grown kids financially and saving for retirement. Here are some tips to consider:

Foster financial independence

Teach children the concept of earning, budgeting and investing as early as possible. This may be done by giving them an allowance when they are younger or encouraging them to get a job when they are older. Teach them the important financial lesson of appropriately managing the money they earn, and consider allowing them to make small-scale mistakes along the way to help them learn. Instilling good financial habits in your children can set a positive foundation for their relationship with money in adulthood — and 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 for you, incorporate it into your planning process. Treat the support you expect to provide as a goal, just like retirement. Determine what is a manageable amount to give your children, and set aside money for that specific goal alongside your other priorities. Don’t be afraid to set a limit on how much you are willing and reasonably able to give.

Encourage them to play a role in college funding

Remember that your kids have options when it comes to funding their college costs. They can use their own earnings, apply for scholarships or grants and, if necessary, borrow to meet the costs of a college education. In retirement, those choices aren’t available to support you. Even if you plan to fund college costs, it can be beneficial for your children to have “skin in the game.” 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 contribute.

Set clear expectations

Communicate with your children how much financial support you plan to give them, if any, during their adulthood. Let them know if any money you give is a gift or a loan, and how long you are willing to help. Don’t be afraid to say “no” if you’re not in a position to help your grown kids financially. Consider other ways you may be able to help them. For example, providing non-financial support, like periodically caring for grandchildren, can be very valuable.

As a parent, it’s natural to want to help your children financially, but be careful not to do it at the expense of securing your own retirement. Prioritize your future and keep it front-and-center. Doing so can help you keep your retirement plans on track, while helping your children build financial independence — a priceless gift to give them.

About the Author

Marcy Keckler, CFP, CRPC

Senior Vice President, Financial Advice Strategy and Marketing, Ameriprise Financial

Marcy Keckler is the Senior Vice President, Financial Advice Strategy and Marketing at Ameriprise Financial. She also oversees the Confident Retirement program. Marcy has been with Ameriprise Financial (formerly American Express Financial Advisors) for 21 years in a variety of positions in financial planning, marketing and interactive development.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022

Recommended

Why Women Need to Take a More Active Role in Their Financial Futures
Women & Money

Why Women Need to Take a More Active Role in Their Financial Futures

It’s a mistake to let someone else make all your decisions or take care of everything for you. You can start taking control of your finances by review…
January 17, 2022
6 New Year’s Resolutions for Your Wealth Plan
retirement planning

6 New Year’s Resolutions for Your Wealth Plan

Everyone could benefit from checking these six items off their to-do list this year.
January 14, 2022
Taxes in Retirement: How All 50 States Tax Retirees
Tax Breaks

Taxes in Retirement: How All 50 States Tax Retirees

We rated every state, plus the District of Columbia, on how retirees are taxed. Some of the results might surprise you.
January 11, 2022
4 Steps to Kickstart a Financial Plan in 2022
retirement planning

4 Steps to Kickstart a Financial Plan in 2022

The new year is a great time to dot the i’s and cross the t’s on your financial plan. Here are four areas that could use your attention right now.
January 11, 2022