Most of us like to help others — especially if those others are our children. I know that I like to help my son. I like going places that I think he'd enjoy, and my husband thinks it's fun to shop for his Christmas presents, keeping an eye out for things he'd like. And, of course, if my son were in trouble, I'd want to help him out. But what can be really difficult is to figure out where the line is when it comes to helping or enabling. You also have to know when to say no when your own financial future is at stake.
Are You Putting Your Own Finances at Risk?
In many cases, helping your kids out occasionally with their finances won't bankrupt you, or even put your retirement at risk. Unfortunately, though, a pattern of poor financial decisions from your children can result in a situation that eventually puts your finances at risk. Even some items of financial responsibility, such as paying for college, can leave your retirement plans in ruins.
It's popular to say that there are loans for college, but there aren't loans for retirement. And, in truth, there are other loans available for your children to use if they are in a tight spot and you can't help without putting your retirement at risk. And they'll have more time to repay those loans — as opposed to the situation you might find yourself in if your money is no longer working on your behalf.
Retaining financial responsibility for your grown and capable children can quickly become a double-edged sword. Your nest egg dwindles, while your children continue to think that they can make poor financial decisions while you take on all the risk. You don't want your declining years marred by inadequate funds because you have spent them all on trying to get your kids back on track. And, if your kids haven't learned anything because you've bailed them out time and again, they won't even be in a position to take care of you financially in order to repay your own efforts.
Teach Financial Skills While They're Young
One of the best remedies to the problem of having your retirement ruined by your children's financial behaviors is one of prevention. Teach good financial habits in the beginning. Encourage financial literacy early on, and focus on helping them learn to take responsibility for their own money.
Set boundaries from the beginning, making it clear what you will help them with — and the conditions for doing so. My mother has always had this rule: If you plan to live at home after you're 18, you'd better have a job, or getting an education that will help you acquire a marketable skill. She also expects anyone living with her to spend their money on paying down debt, and saving up for the future. And you'd better be ready to help out around the house.
Consider what you expect your children to do with money, and then convey those expectations to them. Teach them to manage their money wisely, and there will be a smaller likelihood that they will come looking for your nest egg.