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Financially supporting your adult children. Does it make sense?

While providing emotional support to kids is a lifelong activity for parents, financial support needs a boundary, lest it jeopardize your retirement goals.

As parents, we are naturally inclined to reach out to our children. We rush to offer help from the moment they are born. Once they grow up, some parents let emotion rule their finances. They continue to help their adult children. Apart from higher studies they incur their household expenses, while they live with them. After marriage, the financial support continues for house down payment, grandchildren’s education and so on.

While providing emotional support to kids is a lifelong activity for parents, financial support needs a boundary, lest it jeopardize your retirement goals.

Retired parents should therefore consider the following:

Whenever there is a need to support children, ask yourself, how much can you support without stretching your own finances? At the very least, don’t pull money from your long term investments.

Your Safety First

Have you heard the announcement made in the plane about putting your own oxygen mask before you help your child? If you can’t breathe, you will have a tough time helping others.

Your financial security comes first, and not for selfish reasons. If your retirement kitty is large enough, you will not have to be dependent on your children later.

Whenever there is a need to support children, ask yourself, how much can you support without stretching your own finances? At the very least, don’t pull money from your long term investments.

Early Financial Lessons

It important to teach children money lessons, such as living within their means, as early as possible.

Desist from giving extra pocket money, if they fall short. If they want a bicycle or a cricket-kit, let them ‘earn’ it. Internships at a college level not only expose them to an office culture early in life but also give them a chance to make money.

Further, educate them about the importance of saving for achieving financial independence. All of it will give them the necessary self-confidence to get ahead in all walks of life.

Set Boundaries

Sit across the table and communicate with your kids. Tell them beforehand that while you are always there to offer sound advice or emotional support, there is a limit to the extent to which you can support them financially.

Students graduating out of college might need some initial handholding before they get a job. However, set timelines if it’s linked to ‘first pay’.

Help them understand how they can contribute towards household expenses – be it utility bills, groceries, entertainment, or travel. By communicating and creating firm boundaries, you set their expectation levels beforehand, leaving little scope for conflicts in the future.

Avoid Debt

While you could make financial arrangements for their college education, thereafter, check your financial position. Sponsoring post-graduate education could affect your retirement savings. If it is unaffordable, it is better to communicate the same to your children and take a student loan instead. Ensure it is repaid by your adult children from their earnings, ideally within 5 years.

In the end, it’s all about balancing things out. Of course, you should help in emergencies. However, ensure that, while supporting them you are not making them financially dependent on you. After all, the most important legacy you can leave for your kids, is learning to be financially independent.

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