Why your kids could ruin your retirement
This is not a very popular topic to go over with clients but is completely necessary when discussing financial planning and expenses. Kids are the the best part of our lives and a lot of the financial planning or retirement planning is done with them in mind. However, there are situations when providing for them becomes a natural thing that doesn’t stop no matter what age they may get to.
I’m talking about my own generation Millennials, 27-39 year olds, and now Gen Z, 18-27.
Unfortunately, there are plenty of parents who did cover things like car insurance, phone bills, etc while these people were in high school and then to an extent in college before they supposedly would graduate and then start earning money at a full time job. However, the “parents pay for my bills” still exists in the world and it might be more than you actually thought.
According to this Market Watch article, “About half (51%) of parents of adult children say they have sacrificed their emergency savings and debt payoff efforts to help with adult kids”.
And even this tweet from Morning Brew reporting on the same issue highlights how those bills can add up for parents covering expenses for adult children.
https://twitter.com/MorningBrew/status/1661892403832274944?s=20
That’s an astonishing and scary stat that parents who should be putting the majority of their savings into retirement/investments in The Big Retirement Push (10 years or less out) are instead spending $2,000 per month on their adult children.
Now, I’m sure there has to be some skew in the data with some parents or families with millions that give or hand out plenty of money to their kids but to still see 45% of parents pay for their kids is bonkers.
The Big Retirement Push is a real thing and those last 10 years before retirement are so impactful for how your retirement will play out. That means losing $2,000/month or $24,000 (!!!) per year instead of saving or investing that money can actually push back your Retirement Age by 5-10 years.
If this isn’t you, then thank God. Congrats on paying $24,000 just to make sure your kid comes home for End of Year Holidays. Yet, if this is sounding familiar and you are feeling a little guilty, first off, don’t feel guilty. You are caring for your family and doing the best you can. And there could be some life events that demand the temporary financial support like your kids losing their job from layoffs or health events - totally understandable. But some of the circumstances, like paying for groceries or giving your 26 year old a monthly allowance should be politely stopped.
This all leads to the question: How do I get a hold of my expenses and turn off the payments going out to kids?
Our recommendation, start detailing out and building your budget to truly see all of your expenses. We like and often refer the app Mint. You can plug and connect all your accounts and visibly see how you’re spending and where it’s going. In fact, going through this with your kids to show them the basics of planning and budgeting is an awesome family bonding activity.