Helping Without Harming

How to support your kids financially without sacrificing your retirement savings


If you’re nearing retirement and wondering why your nest egg isn’t as big as you thought it would be, you may want to point a finger at your kids. According to a study by USA Today, one of the biggest drains on retirement savings is adult children. The report found that four out five parents provide financial support for their adult kids. Parents also spend twice as much on their adult kids than they do saving for retirement.

The USA Today report also found that 50 percent of parents would be willing to drain their savings and go into debt to support their adult children. This is clearly not ideal. It’s fine to support your kids financially if you have the means, but things start getting dicey if your contributions begin to hamper your savings for your own long term future. Here are some ways you can help your adult kids with money without risking a drain on your retirement account.

Plan Ahead

When it comes to providing financial support for your adult kids, there is no such thing as too much planning. As one financial planner told USA Today: “It’s better to prepare then repair.” In other words, you want to map out the details of your support as early as possible. That way, there (hopefully) never comes a day when your adult kid becomes angry at your lack of support or total withdrawal of it. If you intend to help with their student loans, make it clear that your help begins with those loans and ends when they’re paid off. The more strategy associated with your support the better off you’ll all be.

Lend If Possible

Instead of just giving your kids money, consider lending it to them. Allow them to borrow what they need as long as they agree to pay it back. Work something out so the payments won’t be too much of a stressor on them. You can even set up automatic withdrawals from their bank accounts so there’s never a missed payment.

Be Honest

Before offering financial support, get brutally frank about how much you can afford to give your kids before it starts depleting your savings. Sit them down and show them your budget. The more transparent you are, the less likely arguments will bubble to the surface down the line.

Chris O'Shea

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