Balancing Act

How to support adult children financially without compromising your retirement plans

What do you say when people ask, “How are you?”

Do you share the ups and downs of your life? Or are you like me and always answer, “I’m fine, thanks!” regardless of your true feelings?

When we navigate social conversations, we decide how much we want to share with others. As a parent and member of what’s called the Generous Generation, I’ve found myself grappling with a similar dilemma. How open about my finances should I be when my adult daughter asks for (and perhaps expects) financial support?

The traditional narrative, where parents usher children into independent adulthood, is changing. The Office of National Statistics reports a 46% increase in 20 to 34-year-olds living with their parents since 1999. For me and many of my clients, this is unexpected terrain. We feel duty-bound to fund our adult children into their twenties, even beyond. Our offspring may want to be self-sufficient, but achieving financial independence is challenging.

A parent’s natural priority is the well-being of their children. We want to provide the best possible support, especially in times of need. University tuition fees and student loans mean the weight of substantial debt can hang heavy. Our children have financial burdens before they even have one foot on the career ladder. In a competitive job market and with rising costs, it’s not surprising that recent graduates turn back to their parents for financial support.

Embracing a gap year, returning home post-graduation, or pursuing further education creates financial burdens for parents. Grown-up children may seek refuge in the family nest when their romantic relationship or a house move hits a rough patch.

My friends tell me it’s like providing an Airbnb to their adult offspring without the benefit of extra income!

Some find the short-term arrangements have extended from weeks to months and years. Reluctantly, parents can find themselves dipping into their retirement savings to fund the additional outgoings.

In this blog, I want to explore the impact of prolonged dependence. I’ll share my tips and strategies to help parents cope financially and emotionally.

1. Taking a Gap Year

Many young adults opt for a gap year to explore the world, build valuable work experience, or find their true calling. Time away from the traditional education and career path can be profoundly enriching. The additional living costs of a gap year tend to fall to parents and can have a significant impact on finances. Your financial planner can help you build resilience into your planning.

Encouraging Responsibility and Budgeting

If you are supporting your child during their gap year, encourage their financial responsibility. Work together to create a comprehensive budget. Don’t try to shoulder the entire burden. Sit down with your child and discuss their planned expenses, including travel, accommodation, and daily living costs. Help them map a realistic budget that meets their goals and available resources. Teach them essential money management skills by involving them in the financial planning process. It’s an excellent opportunity to emphasise the importance of financial independence. You’ll find more tips for Raising Money Smart Kids in my blog.

Creating a Supportive Environment

Emotionally supporting your child’s decision to take a gap year is equally vital. Acknowledge the incredible opportunities for personal growth and self-discovery they’re embarking on. Share your experiences and insights, including any financial constraints affecting their time away. Open dialogue will create a stronger sense of connection and understanding between you.

2. Returning Home After University

The “boomerang” phenomenon is a reality for many households. After 3 years of independence, your graduating child’s homecoming brings unique challenges. You’ll instantly realise the impact their presence has on the dynamics within your home! What’s less obvious is the effect the extra expenses can have on your later life plans.

Setting Boundaries

Maintaining boundaries is essential for harmony!

This phase may come with its fair share of challenges as you and your adult child revert to full-time co-living. Keep talking. You’ve both been used to living on your terms. They may need help to realise the impact their style of living has on you and your home.

A friend’s daughter is about to move back home after 3 years spent working abroad. The intense pride she felt when her daughter was offered an amazing job hasn’t diminished. She’s such a proud mum. But the inevitable wet towels on the floor, untidiness and mess in the kitchen fill her with dread. Worse still, she says, is she’ll lose her single person’s council tax discount! So, what’s her solution for keeping the peace? Honesty and openness, agreed boundaries, and the very firm stipulation, ‘if you use it, replace it’!

Fostering Financial Independence

Addressing the financial aspects of a transition to living together again is crucial. Establish fair expectations for your adult child’s financial contributions. This might include discussing rent or sharing living expenses. Be frank. Explain that their return will add to almost every household bill. Encourage them to take on a temporary or part-time role while they hunt for their ideal career move.

3. Post-Graduate Studies

Investing in post-graduate education can be a wise decision for the academically gifted, but it may require financial adjustments on your part.

The Financial Commitment

Engage in open and honest discussions with your child. Discuss the financial commitment and timelines involved. Explore sources of financial aid, scholarships, and grants. A collaborative approach can help ensure the financial implications are manageable for your whole family.

Balancing Support and Realistic Planning

Striking a balance between support and realistic financial planning is vital. Acknowledge that both their education and your financial future are important. If you address both aspects candidly, you can create a path forward that accommodates everyone’s interests.

4. Relationship Changes

When a romantic relationship ends, it’s natural to seek the comfort of our family and friends. If your adult child needs your help, laying down your terms and rules before you agree to financial help is not unkind.

A Safety Net

Your help with living expenses can provide a crucial safety net during your child’s transition. Encourage them to regain their financial independence in small steps. A parent’s rational perspective can help them look more objectively at their options.

Being a Pillar of Support

You’ll naturally want to lend an empathetic ear or offer a shoulder to lean on. Focus on everyone’s well-being (including your own). Emphasise the need for self-care. While you provide much-needed support, be mindful of your own goals. Aim for a balance between being a reliable source of emotional strength and safeguarding your own retirement dreams.

Key Takeaways

1. Make time for regular financial reviews with your financial adviser. An experienced adviser will offer practical solutions to changing family dynamics.
2. Maintain your emergency fund. These savings can help towards any unexpected expenses without compromising your retirement savings.
3. Set clear boundaries and expectations with your adult children. Help them develop a sense of responsibility and independence.
4. Prioritise self-care to manage the inevitable emotional stress. Seek support from friends or professionals if needed.

If you need advice about coping with financial change, give me a call. I’d love to help you.

Book a FREE discovery call HERE.