How To Stop Your Grown Kids Draining Your Retirement

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How To Stop Your Grown Kids Draining Your Retirement

Saving for retirement? You might want to have a look at how much you’re spending on your kids — not the little ones, but the adults.

Many of us have financial goals that extend beyond ourselves to include our children. When you see them in need, you help before it’s even asked of you. But once your children are grown up, that financial aid can begin to take its toll on your financial future.

recent report from Merrill Lynch and Age Wave found that parents are spending a combined $500 billion on their grown kids (ages 18 to 35) — double what they’re putting towards their own retirement.

Mixing familial relationships with money can be a minefield, but it doesn’t have to be. Before offering financial support to your loved ones, make sure that doing so doesn’t cause you to deviate from your own course. 

A Parent’s Love

If you’re one of the parents who is still giving money to your adult children, you’re not alone. 80% of parents of adult children are covering, or have covered, at least a portion of their adult children’s expenses after they turned 18. And while it’s important to help your kids transition to adulthood, doing so shouldn’t cripple your retirement savings. So where is this money going?

Almost half, or 45%, of parents with adult offspring have given their children money during the coronavirus pandemic and of those 79% said the funds would have otherwise gone towards their own personal finances, a survey from CreditCards.com found. Now is the time to start taking back your finances and plan for your own future.

Taking Back Control

Once children enter early adulthood, it’s about setting limits and keeping to them. There are a few steps you can take to make this process as painless and profitable as possible while still supporting your children where needed:

  • Stick to a budget as best you can and understand the expenses you’re paying: Try to keep an emergency fund. And definitely continue contributing to your HSA, 401(k) or IRA.
  • Have regular discussions about money: Even before children reach adulthood, also helps to instill healthy savings and budgeting habits. If you have difficulty discussing money with your adult children, consider looping in a financial advisor or other expert.
  • Lend, don’t give: If your child needs money for a specific purchase, let them borrow and pay you back in affordable payments. Try automatically deducting cash from your child’s bank account, essentially acting as an interest-free loan.
  • Ask for help: If your child moves back home, they should help out with the regular expenses such as utilities, groceries and rent.
  • Plan ahead: If you want to help pay back student loans, contribute to your child’s wedding or give a lump sum for a down payment on a house, start planning early.

Your Financial Future Starts Here

The idea of relying on your children as a financial backup when you’re older might seem appealing, but asking your adult children to help fund your retirement may put their financial security at risk. Financial wellness is something that needs to be planned for and monitored, ultimately your children need to learn this, too.

Once children enter early adulthood, it’s about setting limits and keeping to them. Stick to a budget as best you can by understanding the expenses you’re paying. Try to keep an emergency fund. And definitely continue contributing to your HSA, 401(k) or IRA.

If you’re looking for innovative ways to make your retirement savings go the extra mile, the financial experts at CKS Summit Group boasts cutting edge tactical portfolios to help our clients achieve safe, healthy growth of their savings and preservation of their principal balance. Check out our key portfolios here, and click here to set up your complimentary strategy session today!