When planning for retirement, it’s crucial to assess not only your own financial habits but also how supporting adult children affects your retirement savings.

Many parents find themselves in a situation where they’re financially aiding their grown children, often without fully realizing the strain it puts on their nest egg.

According to a recent report by Merrill Lynch and Age Wave, parents collectively spend $500 billion on their adult children aged 18 to 35, which is twice the amount they put towards their own retirement savings. Balancing familial obligations with financial responsibilities can be tricky, but with careful planning, it’s possible to support your children without jeopardizing your retirement plans.

Understanding the Financial Consequences

It’s common for parents to provide financial assistance to their adult children, 44% of young adults say they received financial help from their parents in the past year. While helping children transition into adulthood is important, it shouldn’t come at the expense of your retirement savings. It’s crucial to recognize the potential impact of supporting adult children on your own financial stability. A PEW research study found, that among parents who provided financial assistance to their children in the past year, 36% admitted that doing so has negatively affected their personal financial situation to some extent. 

Taking Control of Your Finances

To ensure your financial aid to your adult children doesn’t derail your retirement plans, it’s crucial to establish boundaries and stick to them. Here are some steps to consider:

• Open Communication: Have regular discussions about money, starting from an early age. If you find it challenging to talk about finances with your adult children, seek guidance from a financial advisor.
• Lend Instead of Giving: Instead of outright giving money, consider offering a loan that your child can repay in manageable installments. Setting up automatic deductions from their bank account can help enforce this arrangement.
• Share Household Expenses: If your child moves back home, establish clear expectations for them to contribute to household expenses such as utilities, groceries, and rent.
• Plan Ahead: If you anticipate future financial needs for your children, such as student loans, weddings, or buying a house, start planning early to mitigate the impact on your retirement savings.

Looking to the Future

While on the flipside, relying on your children for financial support in retirement may seem tempting, but it’s important to prioritize your own financial wellness. Teaching your children about financial planning and financial independence is crucial for their long-term security as well. A discussion around saving, investing and estate planning is a great place to start.

As you navigate the delicate balance of supporting your grown children without compromising your retirement savings, consider enlisting the knowledge of a financial advisor like CKS Summit Group. Our team crafts personalized strategies to help you achieve financial security while fulfilling your familial responsibilities. From creating budgets and managing investments to planning for future expenses, our advisors can provide invaluable guidance tailored to your unique situation. Prioritizing your own financial well-being while imparting essential money management skills to your children helps to ensure a stable future for both generations.

Final Thoughts

Navigating the balance between supporting grown children and securing your retirement requires careful planning and open communication. By setting clear boundaries, maintaining financial discipline, and seeking professional guidance, you can support your children while safeguarding your financial future. At CKS Summit Group, our team of financial advisors offers innovative solutions to help you achieve your retirement goals. 

Whether you’re approaching retirement and need help advising your grown children, or you are the grown child looking to learn more about your financial future, schedule a complimentary strategy session with us today to explore how we can help you secure a prosperous retirement.