Discussing children and money in the same sentence can be dangerous. Most parents want to be able to support their children financially, but sometimes worry how to do so without putting their own futures in jeopardy. Children can be expensive, so when it comes to planning your retirement, you need to figure out a way to balance your financial security and your relationship with your children.
Taking on Their Debt
Do you know why credit card companies are so eager to hand out credit cards to new college students? Because they know that if the students rack up large debt on them that they later realize they can’t pay, mom and dad will likely bail them out. It’s all well and good to help your child climb out of debt, or to help them manage debt that keeps piling up, but there’s a huge difference between this and giving money to pay off their debt. When you do this they learn no responsibility for their actions and will likely do it again knowing that you will bail them out again.
Saving for Them but Not for Yourself
So many people always talk about saving for their children, whether it’s for their weddings or college educations or to help them out once they go out on their own. While it’s great to help your children out, you want to make sure that you save money for your retirement as well. You should never put saving for your children ahead of saving for yourself and with a little planning and budgeting, you should be able to do both.
Not Teaching Your Kids about Money Management
It’s important to teach your kids about money management because this could potentially help you out when you retire! While teaching them doesn’t ensure that they’ll actually listen to your lessons, you might get lucky and instill some good financial sense into your children. Having children who understand budgets and savings might make them less likely to rely on you for financial matters once you retire.
Overspending on Children
Many people want to live in the moment and worry about money and expenses at a later date. While it’s always important to make sure that your children are well cared for, it’s also important to think about long-term plans. You don’t want to overspend on expensive gadgets instead of putting aside money for college educations. In fact, some would claim that spoiling your children is child abuse. You don’t want to drain your entire savings and retirement account spoiling them with things they don’t need.
Offering Money You Don’t Have
One of the worst ways to ruin your retirement is by giving money away to your children that you don’t actually have. Parents always want to make sure their children are secure, but you’re not helping your situation if you give them money that you’ll need to use for bills or other necessities. It can sometimes be difficult to deny money, especially if there’s an emergency, but offering money that you need for other things simply switches the problem from them to you.
Letting Them Manipulate You
Children can be masters of manipulation, and they will try their best to get what they want. Part of the responsibility you have as a parent is to not fall for this manipulation. When children learn that they can manipulate you, chances are that it’s going to have a large negative effect on your finances. Once again, this is where having a plan and a budget that you can point to can make it much easier to foil their manipulation attempts.
Not Kicking Them Out
There is a time to help your children out to get back on their feet, and there is a point when you simply are enabling their selfishness. This can often be seen with children that live at home well into adulthood. If you let your child live at home without paying room and board year in and year out, they are going to drain finances that could otherwise go to your retirement. If you allow your adult children to come home to help them out, set a time limit when they need to be out. If you don’t, you won’t be financially helping either of you.
Competing with Their Friends
It a difficult life lesson that most children need to learn: life isn’t fair and they are not their friends. If you feel obligated to try to provide for your kids everything that other families are providing for theirs, you are going to see a huge money drain from your bank account. This is simply the kid version of “keeping up with the Joneses” and it will have the same result on your financial stability and retirement.
Investing in Their Business
Parents want to help their children as much as they can, but one way to lose a lot of money is lending to your children to start a business just because they are your children. Running a business is risky and even those who put their heart 100% into them don’t always succeed. If you invest, you should do so because they have a quality business plan that indicates that you will receive a good return on your investment. A good rule of thumb is that if you wouldn’t invest if a total stranger came up to you and made you the offer, then you shouldn’t with your kids as well. The truth is, if they have a good plan, they should be able to get a loan through normal financial means like a bank or the small business administration. Far too many parents put their retirement at risk trying to help their children begin a business that they want.
Having Them too Soon
Having children is expensive, so you need to have a strategic plan when it comes to your finances. Having children without a financial plan on how to pay for all the costs that come with having them will put you in a difficult financial situation for a minimum of 18 years. You’ve probably heard plenty of financial advisors telling you to start saving for your retirement as soon as possible and when you have a child before you’re financially stable, this will be impossible. It’s important to figure out early on how much you can put aside for your children and how much you need to put aside for your retirement. Without a plan, you’re likely to delay preparation for your retirement which will inevitably lead to money trouble down the road.
(Photo courtesy of Carissa Rogers)