Help Your Adult Children Financially Without Ruining Your Retirement

by - Thursday, May 17, 2018


Millennials haven’t had it easy – at all. The generation of those born in the 1970’s and the 1980’s have watched the digital world unfold, have seen the evolution of the mobile phone and understand that being ‘first world poor’ means that you sit on an expensive laptop or touchscreen smartphone while logging into online banking to see how poor they are. Millennials have reached adulthood in a time where the economy is flailing wildly, house prices have trebled over two decades and the job market has crashed so badly that for every job that is available, there are two hundred applicants desperate for a look-in. It’s not an easy time to be independent from parents, and it’s exactly why many adult children are leaving the nest later and later, and why those who do leave the nest come straight back to the fold.

While straddling thousands of pounds in student loans and trying desperately to save for a deposit for a house, many parents of the millennial generation are stuck between a rock and a hard place when it comes to whether they should dip into their own finances to help their kids. It’s not that they don’t want to, it’s just that retirement is fast approaching, and the more that parents help their kids, the more that they put themselves out of pocket. It’s a huge deal, one that can affect your plans to retire if you’re not careful about how you go about dishing out cash to your kids. The main way that adults are managing to stay financially stable is to stay living in the family home while they save up. The trouble with this is that it is not ideal for anyone. Parents want to raise financially savvy and independent kids, while kids don’t want to be living under the feet of their parents. Sure, they can get cheap guarantor loans to help them to move out, but it’s not the only solution out there that can help the kids to grow up a little and move on. If parents allow their kids to keep the nest feathered, they are saving them from struggling – and yet sometimes, we have to let our kids struggle so they can learn to fly. Ideally, your kids will be working hard and saving as much money as they can, but all that financial support can be so hard on you.

You have to have an exit strategy. You may be a parent, but that doesn’t mean you need to continue to feel like you’re sharing your finances with the kids. You have a life to live, too, remember? Many parents in the country are providing financial help very regularly to their kids, whether this is through paying their rent, managing their bills or running their car for them. The more that you pay out, the les that you have in your retirement pot later on. You can’t – and shouldn’t be dipping into your own savings for the good of your children, because it won’t be returned to you when you can’t survive in retirement. When you are providing an unlimited amount of financial support now, you’re taking away the chance for your children to be financially independent. You want them flying the nest and feathering their own, and the best way that you can do that as a parent is to wean them financially from you. Your help is always going to be well-intentioned; everyone knows that. These are your kids and you want to do your best for them. You want to make life easy for them. In doing so, you could easily be having a detrimental effect on them later on.

Your actions in helping your children have to have some balance, and the only person that is going to draw in that balance is going to be you. You need to be able to live within your means and a big part of that is going to be learning to say no. It’s a difficult thing for some parents; the tug of war in your heart that says you’re supposed to help is going to confuse you. You are going to still help your child, though, because helping them to be financially independent is going to be the best assist that you can give. The best place to start for the kids who are living in the home is to charge them housekeeping costs. Sit down and draw up a contract for their dates to pay a percentage of their wage. They can work this out with you, and you can make it clear that this payment has to be kept on top of. The reason for this is to teach them how to budget their wage; if this was the real world and they were renting elsewhere, they’d have to keep up their payments or risk losing their home. This has to be no different while living with you.

The next thing that you have to do is to separate wants and needs. If you’ve always planned to pay off their student debt, then continue to do so, but that doesn’t mean you’ll give them the money to go away on a package holiday or head to the best clubs for nights out. If this means paying their student finance directly to the place that they owe the money, then so be it. You’ve got to be disciplined about this, as we know it can be very hard for you to let go of the control you have previously had on their happiness. It’s a very nice thing to run their car for them, but it doesn’t teach them to manage their money themselves. Don’t derail the work you’ve put in to building your retirement fund by paying out for your children who are perfectly able to pay out for themselves. Give them the chance to be independent with their cash, and show them how proud you are at the same time.

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