Why You Need To Cut Your Kids Off — and How To Do It
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If you’re an empty nester who’s still financially supporting your adult children, you’re not alone. A survey of more than 1,800 empty nesters across the country conducted by 55places, an adult community comparison site, found that nearly 40% are still financially supporting their children in some way. Those who are still providing financial support spend an average of $254 per month on their child or children, with the most common expenses being cellphone plans, rent and groceries.
Although you might feel compelled to lend a helping financial hand to your kids, doing so can put you at risk of jeopardizing your own finances and retirement plans. Take these steps to cut off your children so you can retire comfortably one day.
Last updated: Nov. 15, 2019
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One-Third of Parents Said They Would Delay Retirement To Help Their Kids Financially
According to a separate survey conducted by Ameriprise, about one-third of Americans ages 30 to 69 with at least $100,000 in investable assets have delayed their own retirements or would do so to help their kids pay for college. The survey also found that 80% of respondents either have given or plan to give financial assistance to their children to pay for their first car. Another 78% either have contributed or plan to contribute toward their children’s wedding expenses, while 40% either have contributed or plan to contribute toward their children’s first home purchase.
Before you reach into your wallet, make sure you know the risks of continuing to provide financial help to your kids.
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Paying For Your Kids Can Hinder Their Ability To Be Financially Independent
Allowing your grown children to lean on you financially can end up hurting them in the long run, said Ryan Moore, founder and CEO of Kingman Financial Group in Corpus Christi, Texas.
“If you’re a parent financially supporting children into adulthood, you’re enabling them to be reliant on your financial support for the rest of their lives,” he said. “It’s critical that you teach your children the value and responsibility of earning and managing money.”
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It Can Harm Your Own Financial Health
Providing for your children into adulthood can also put undue strain on your own finances — and possibly derail your own retirement plans.
“You may find yourself working way past retirement age, or once you retire, you may realize you don’t have nearly enough saved,” Moore said.
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You Need To Protect Your Retirement First and Foremost
“The most important thing you can do is protect your retirement first,” said Kelly Crane, president and chief investment officer at Napa Valley Wealth Management. “You might feel selfish in doing so, but it’s truly the most critical choice to make. If you choose to provide for your child first and underfund your retirement accounts, you’ll significantly impact your future retirement income and might inadvertently create a future hardship.”
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Remember That Time Isn't on Your Side
“We would never recommend giving money to your adult child if you’ve recently drained your emergency fund or your retirement savings is not on track,” said Matthew Helfrich, president at Waldron Private Wealth. “Your child has their whole life to improve their financial outlook. You do not have that luxury anymore.”
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It Can Leave You With Debt
“We see it all the time at my debt solution law firm — retirees letting family live with them and fronting the cost of higher living expenses, or giving money directly to adult children struggling on their own,” said Leslie Tayne, founder and head attorney at Tayne Law Group. “This often liquidates any savings or retirement funds quickly, and these funds very often aren’t replaced. Then the retiree ends up in debt.”
Now that you know the risks involved, find out when — if ever — you should provide financial help to your kids.
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Some Costs Are OK To Share
The 55places survey found that many empty nesters still share family account expenses with their children, with 38% sharing a cellphone plan, 34% sharing a health insurance plan, 33% sharing cable/streaming services, 32% sharing a car insurance plan and 9% sharing a music streaming plan. To make these plans work best for you and your kids, make sure they contribute for their share.
“Sharing expenses such as cell phones, health and streaming services can certainly provide many benefits to both children and their parents,” Moore said. “Not only can it reduce costs and achieve a better rate for all parties, but it can also help bring a family together and establish great bonds.”
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It's Also OK To Help Your Kids Through Major Financial Milestones — as Long as It's Within Your Budget
“It’s not uncommon for parents who are financially secure to help their kids with weddings, down payments on homes and school loans,” Tayne said. “However, it’s a bad idea to financially support your grown children if it will jeopardize your financial stability.”
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Be Realistic About Your Budget
If you do choose to financially support your children, make sure you’ve factored in all the costs associated with retirement and then determine if you have enough left over to give without harming your own financial situation.
“To determine whether or not you can financially support your children at all, you must understand your household needs,” said Moore. “This includes understanding how much you’ll spend each month on housing, utilities, food, health and other expenses. Also, it’s important that you factor in any other related costs that sustain your lifestyle.”
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Ask Yourself: Can I Live Comfortably if I Give My Child Financial Help?
“If you have the extra cash flow available you may want to consider helping your child out, but it should not be at the expense of saving for retirement or your own financial goals,” Tayne said.
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Don't Feel Obligated To Pay For a Child Who Lives With You
According to the 55places survey, most empty nesters expected their child to move out at age 21 — but 49% said their child was 21 or older when they finally did move out. The survey also found that for 38% of empty nesters, a child moved back in after moving out. Even if an adult son or daughter lives with you, that doesn’t mean you should pay for all of their living expenses, said April Lewis-Parks, director of education at Consolidated Credit.
“Charge them rent,” she said. “Split the electric and water bills. Make them buy their own food. Share tech expenses like Wi-Fi and phone plans. Think of living at home as a halfway house for the rigors of daily life on their own.”
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It's OK To Say 'No'
If you don’t have enough of a financial cushion to help your kids without hurting yourself, you shouldn’t feel obligated to give them money.
“Sometimes you simply have to say ‘no,’” Tayne said. “While parents want to make sure their children are taken care of, giving too much to your children can put your own finances at risk. It might be a difficult conversation, but you may need to consider cutting off your children or decreasing the amount of money you give to them. Going into bankruptcy, particularly in retirement, is not worth it.”
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Help Your Kids Help Themselves
The best way to cut your kids off is to set them up for success so they’ll be able to thrive without your financial contributions.
“Help steer them in a direction in which they will be able to provide for themselves,” Moore said. “Encourage them to find a job in a career path that they enjoy. Inspire them to set goals and continue the drive and dedication it takes to achieve those goals. Push them to become an entrepreneur if that suits them best.”
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Once Your Child Has a Job, It's Time To Start Cutting Them Off
“There comes a point when raising children that you have to let go financially and help push your now-adult child into the world of financial responsibility and independence,” Tayne said. “When your child moves out and has their first full-time job, the time has come to start cutting back on paying their bills.”
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Start the Process of Cutting Them Off Slowly
If you’ve been providing a lot of financial support to your child, they might not be able to adjust if you cut them off completely all at once. Tayne recommends taking baby steps.
“Your child may still be getting their financial footing, so it can be a gradual process of handing the bills over to them one at a time as they continue to save and have their income increase,” she said. “Your child will also benefit from having bills in their own name to build a credit history.”
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Set a Timeline
“To prepare for financial independence, the most important thing your children need is time,” said Logan Allec, a CPA and owner of personal finance site Money Done Right. “Don’t just pull out the rug from under their feet — give them anywhere from several months to a year to figure out their future. Having a strict timeline may give them the motivation that they need to put their future plans into hyperdrive and grow into their independence.”
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Keep the Conversation Positive
“Talking about finances can be stressful, especially for young adults who are just starting out in their careers and may already find themselves in debt thanks to hefty student loans,” Tayne said. “It is important to try to always keep discussions about money positive and free from judgment or criticism.”
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Teach Them How To Budget
In addition to steering your children down a successful career path, it’s also helpful to give them a basic understanding of how to balance their new income with their living expenses.
“Managing a budget is a key to financial success,” Tayne said. “Make sure to stress the importance of creating a budget each month that adjusts as financial circumstances change. Teach your children how to be a savvy shopper so they maximize the value of their dollar, and [how to budget] so they are able to live within a budget that responsibly supports their everyday must-have household expenses. Help them identify their needs versus wants so they can concentrate on tending to necessary household expenses before indulging in any luxury desires.”
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Make Sure Your Child Has an Emergency Fund
If your child doesn’t have an emergency fund, they’ll be running back to you for financial support as soon as they hit their first bump in the road. That’s why it’s important to encourage them to start saving right now.
“Suggest to adult children [that they should set aside] a little bit of money out of each paycheck for this fund,” Tayne said. “It doesn’t have to be a lot — as little as $25 a paycheck could be enough. Having an emergency fund helps ensure cash availability should something break or an emergency situation should arise where money is needed quickly. It also eliminates the risk of resorting to credit cards for sudden expenses, which can lead to high-interest fees and potential debt.”
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Emphasize the Importance of Saving For the Future
Young people tend to live in the “now,” so it’s important to encourage your children to save for their future goals and dreams, too.
“This can be a new car fund, new home fund, vacation fund or even an early college savings fund for when they have children of their own,” said Tayne. “This account should be set up as an additional savings account intended for fulfilling goals and desires rather than a retirement fund. It should also be kept separate from an emergency fund since the emergency fund should only be used during times of true emergencies.”
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Ensure Your Child Is Realistic About Debt
Perhaps you’ve always paid off your kids’ credit card bills or have been making payments on their student loan debt. When you transfer these expenses to your children, make sure they understand how much debt they have and how they can stay on top of it. Also, look for signs that they are struggling with debt once you transfer these expenses to them.
“Putting all the amounts together will help them realize whether or not they have a manageable amount of debt,” Tayne said. “Be aware of tell-tale signs of a potential debt problem such as only being able to make the minimum payment on credit cards, continually transferring balances to other credit cards or loans, and asking family members to borrow money or co-sign loans.”
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Offer Emotional Support
“Reassure your children that just because you will not be supporting them financially, it does not mean that you will not be supporting them emotionally,” Allec said. “Ask your children to identify non-financial ways that you can support them during this journey.”
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