Moms and Dads Face Retirement Uncertainty When Giving Financial Help To Children
Parents tend to spend around $250 a month, on average, even though it’s 20% financial support offered to their children. It’s no surprise that people who live in high cost of living areas are getting more help than peers living in rural area. The children who studied design and art seem to be getting the most help.
It’s not that big of a surprise either, as student loan debt for the class of 2015 is averaging $30,000 per person. And, many of the highly-skilled jobs are located in areas that have high rent. There’s not a lot of wiggle room in the millennial’s budget. However, the budding retiree doesn’t have much wiggle room either. 21% of soon-to-be retirees have an income of $50,000 or more. 57% of Medicare beneficiaries have an income of 30,000 or less.
How Mom and Dad Can Assist Their Kids To Become Financially Independent
Let Children Know Upfront What Will Happen Financially
It’s important that parents inform their kids – before going to college – how much they’ll contribute and what they expect from their children. If a child decides to move to a high-cost region, they may need to entertain the possibility of roommates. If a child gets a lower-paying job, it’ll take them longer to pay off their student loans.
Parents should tell their children if they are or are not willing to help them after they graduate. And, if they do help, they need to take into consideration their own future.
Parents Need To Know Their Financial Standing
Parents should consider how much they have in savings and what their savings goals are before they start supporting their adult children. A financial advisor can assist them with various projections at different savings rates.
Instead of sending the extra money parents put toward the college education into their after-graduation years, parents need to put it toward their 401(k) or IRA for retirement. If children need money now, parents should inform them that the money is a loan which they pay back as they become financially stable. This will help parents as they age as well. It’s a win-win.
Demand That They Are Accountable
If parents must support their grown children, it’s okay to demand some accountability such as how the help is going to be given and for how long. Demand to see their expenses – what can be trimmed, cut away, etc. Parents who pay the bills can demand that their children reduce their financial spending. Make them stick to a budget – it’ll do them wonders.
While the money talk is never easy, parents shouldn’t be supporting them until their deathbed either. When parents don’t save enough for their own retirement, it means becoming dependent on the child who may never have learned how to live within their means.