5 Red Flags That You’re Ruining Your Retirement by Supporting Grown Children
Written by
Dawn Allcot
Edited by
Brendan McGinley
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It’s natural to want to help your kids succeed in life, even giving them money or a place to live so they can have a strong head start. But as the saying goes, make sure your own oxygen mask is securely attached before helping others.
Roughly one in five (19.2%) young adults aged 25 to 34 live with their parents or their in-laws, according to a National Association of Home Buyers analysis. But grown children don’t have to move in with you to create a financial burden. Here are some signs you’re putting your adult children’s financial needs ahead of your own at the detriment of your retirement.
You’re Not Maxing Out Your 401(k), but Still Buying Gas and Groceries for Your Kids
It’s one thing to treat your children to dinner on special occasions or even pitch in for a big event like a weekend of family vacation. But if you haven’t maxed out your 401(k), IRAs or other retirement accounts, including allowable catch-up contributions, take note of the age-old financial advice and “pay yourself first.”
Similarly, don’t skimp on bolstering your emergency savings to cover your kids’ expenses.
You Co-Signed a Loan You Didn’t Feel Good About
It’s tempting to want to help out your grown children with a major purchase like a car or a home. But think carefully before co-signing on a loan or taking on debt you can’t afford. Missed payments can hurt your credit as a co-signer, making it harder to secure financing for yourself if you need it in the future.
Your Adult Children Live With You but Don’t Contribute
Every capable member of a household should contribute in some way. If your adult child is unemployed and looking for work, they can still help out with chores. Once they start earning money, help them establish a budget that includes their bills plus a portion of household expenses. This isn’t just about “no free rides,” but establish a sense of responsibility to others by contributing however possible.
There’s No Specific End Date to Financial Help
It’s understandable for a young adult in today’s economy to face financial struggles. But if they begin to expect your help every time they’re short on cash or have no plans of moving out since they’re living with you rent-free, they won’t learn how to budget or manage money.
“It magnifies their stupidity when you give them money,” financial guru Dave Ramsey bluntly stated in a podcast episode, in response to a caller who asked about helping her financially irresponsible adult child.
Set ground rules on what you will and won’t pay for and establish how long you’re willing to help. Otherwise you’ll need financial help in your own retirement.
You Give Your Adult Children Money and Don’t Tell Your Spouse
Financial infidelity or keeping secrets about money from your spouse, is more common than you’d imagine. People frequently lie about the costs of purchases, debt and giving money to other people, according to a survey by annuities expert John Stevenson. If you’re helping adult children financially without telling your partner, you could ruin more than your retirement.
It’s important to come clean and decide, together, how much you want to support adult children and how much you can realistically afford.
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