Equate it to a flight attendant advising you to always put on your own oxygen mask before assisting others. Preparing for retirement before you dole out money to support your adult children will ultimately benefit the entire family. If you don't pay yourself first, you could end up in a situation where they need to support you later in life. Below are three things to consider when discussing this topic with your kids.
1. Be transparent and honest. Even the most innocuous discussion with a child about post-college plans can provoke anxiety in someone who is uncomfortable discussing financial boundaries with a loved one. Before engaging in such a conversation, we recommend parents have a clear understanding of their finances and retirement goals. Use this as an opportunity to check in with your advisor — perhaps even accompanied by your son or daughter — to talk about the flexibility you have in your budget before any commitments are made.
Some parents opt to create an "independence fund" for their kids — a flat sum to help them get on their feet (down payment, emergency fund, moving expenses, etc.) upon graduation from college. Working with your advisor, you can set a modest goal for contributions, realistic to your own personal finances. Bringing a third party into the equation provides objectivity. It also gives your child the opportunity to reflect on whether or not he or she wants to put you in an uncomfortable financial position.
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Regardless of whether or not there is a third party involved in the conversation, it is important to be honest and direct about what you are able to offer. Eliminating this confusion can reduce the likelihood of rash emotional decisions down the road and minimizes the potential negative long-term impacts on your retirement readiness.
2. Put it in writing. Whether you have arranged to bring a financial advisor into the conversation or not, putting the plan in writing is essential. This shouldn't be seen or positioned as a "contract." It's simply a record of the agreed-upon timelines or provisions attached to your support, such as how long you'll be willing to supplement rent and/or living expenses for your child and at what dollar amount.
Taking time at the beginning of the arrangement to develop a financial plan has the added impact of helping your child calculate their everyday expenses and savings goals. After all, the long-term goal of offering initial support to an adult child should be to put yourself out of the business of assisting them financially (i.e., help your child journey forward independently). Creating a financial plan can provide the strategic insight to do so.