Supporting Adult Children And Protecting Your Financial Health

As a parent of adult children, you’ve likely asked yourself a crucial question: How can I support them financially without jeopardizing my financial security? When faced with their financial challenges, your initial impulse might be to assist them. However, this approach may not be the best strategy for achieving a secure financial future for them or yourself.

Many adult children rely on their parents for various forms of financial support, from covering basic living expenses to helping with educational costs. More than three in five (61 percent) parents of adult children age 18 or older are financially sacrificing or have sacrificed to provide financial assistance to their kids. This trend is not only limited to Gen Z but also affects Millennials and even some Gen Xers, creating a complex web of financial dependencies that can strain the resources of aging parents.

Many parents said they are delaying milestones and are not on track to buy a home (50%), save for retirement (46%), or start investing (40%) within the next five years – even though they are working toward those goals. While this altruistic behavior is commendable, it poses significant risks to the parents’ long-term financial health and stability.

So, how can you help them without breaking the bank? Here’s what you need to know.

Setting Financial Boundaries 

It is crucial to have an open and honest discussion about what financial support you can provide. Communicate clearly with your adult children about your intentions regarding financial assistance during their adulthood. There are numerous ways to support your adult child without providing direct financial aid. For instance, you could offer to help with childcare by watching your grandchildren, thereby reducing daycare expenses.

Alternatively, picking grandchildren up from school can alleviate some of their daily stresses. It’s crucial to be transparent about the boundaries you’ve set as a parent, outlining what you’re willing and able to do to support them. It’s perfectly acceptable to assert boundaries and say “no” if you’re unable to meet their financial needs at this time. Establishing an open line of communication can help ensure that both parties understand each other’s expectations. Fostering a space for communication can also help maintain a healthy relationship built on mutual understanding and respect.

The Importance of Financial Planning for Aging Parents

As parents enter their later years, their financial priorities undergo significant changes. Imagine a scenario where you are ready to retire, but your adult child struggles to find stable employment. Without a well-crafted financial plan, they risk depleting their retirement savings, potentially exposing themselves financially. Here are several compelling reasons why aging parents should prioritize robust financial planning:

1. Retirement Security: A well-structured financial plan helps parents have sufficient funds to cover their retirement years, accounting for living expenses, healthcare costs, and potential long-term care needs.
2. Expense Management: With a clear plan, parents can balance supporting their adult children and managing their financial obligations without prematurely depleting their resources.
3. Tax Efficiency: Financial planning helps parents understand and implement strategies to minimize tax liabilities, thereby preserving more of their wealth for themselves and their beneficiaries.
4. Peace of Mind: A secure financial future can give parents the freedom to enjoy their retirement without the burden of financial uncertainty. Ultimately, having a well-executed financial plan protects their financial well-being and can help enhance their quality of life in later years.

Find Solutions With Money Management

Working together is key to finding viable solutions if you financially support an adult child. Introducing concepts like earning, budgeting, and investing is crucial early on. This can begin with giving allowances to youth or encouraging employment as they mature. Teaching the vital lesson of responsible money management includes allowing minor financial missteps to foster learning.

Planting sound financial habits early on lays a solid groundwork for a healthy relationship with money in adulthood, reducing reliance on parental financial support. If debt becomes a persistent issue, seek professional advice on debt management and financial strategies.

Getting Help From a Fiduciary 

Giving your adult children money may help them in the short term but may not give them the skills and tools they need to be financially successful. If providing financial assistance to your adult children is a priority, incorporate it into your financial planning process. Working alongside a fiduciary can be valuable for families navigating the financial complexities of intergenerational support.

At Agemy Financial Strategies, our firm exists to help clients achieve their personal and financial goals. Our philosophy is to deliver quality financial programs and teach principles for successful living. We work hard to deliver a dependable retirement income strategy in any market so that you can enjoy the “best” of your lives during retirement. Here’s how our fiduciaries can help:

1. Holistic Financial Planning: Our fiduciaries can provide a complete financial plan that considers both the parent’s and adult children’s financial goals. This helps ensure that the parents’ retirement plans are not compromised while still providing necessary support to their adult children.
2. Investment Strategies: Fiduciaries can develop investment strategies that balance risk and return, helping parents grow their savings even as they provide financial support to their adult children. This approach can help mitigate the impact of unexpected financial demands.
3. Estate Planning: Proper estate planning is essential to ensure that assets are distributed according to the parent’s wishes and that the financial needs of all family members are met. A fiduciary can assist with wills, trusts, and other estate planning tools to secure the family’s financial future.
4. Education and Financial Literacy: Our team of fiduciaries strives to help educate clients and help them understand the long-term implications of their financial decisions. Our goal is to help empower your family to become financially independent over time.

Final Thoughts

Many established families face the reality of financial interdependence between aging parents and their adult children. While providing financial support is a noble endeavor, it is essential to approach it strategically to secure the long-term financial health of all involved. You’ve put time and effort into building a sustainable retirement plan. Don’t derail your hard work by giving away more than you can afford.

A fiduciary can offer the guidance needed to navigate this complex landscape, helping families achieve financial stability and peace of mind. At Agemy Financial Strategies, we take a holistic approach to financial planning, helping families balance the immediate needs of adult children with the long-term goals of aging parents.

Do you need help managing your retirement expectations with your loved ones? Contact us today to speak with one of our fiduciary advisors.