Cutting Off Your College Kids Before It’s Too Late
As parents, we do everything we can for our children. When they are little, our role is clear- they rely on us for everything. As they grow, we adjust our levels of support and the ways in which we provide it. As they become adults and begin their own lives, the line becomes blurred and it is not always clear if we are helping or enabling, particularly when it comes to financial matters.
A recent USA Today article caught our attention. In it, they discuss the reality that many parents today continue to support their college graduate children financially- at the expense of funding their own retirement.
The article cites a recent Bankrate survey that roughly 50% of American parents with adult children say helping their adult children takes away from their own retirement savings. A survey last year from Merrill Lynch found that half of parents would draw down savings and a quarter would go into debt or pull from their retirement to help their adult kids. Ongoing financial support of adult children can become a slippery slope that keeps everyone involved from leading their own best, independent lives.
This got us thinking- what steps can we take to keep this from happening in the first place?
Here are the 5 ideas we came up with:
Teach them personal finance
Start early. Most school districts barely cover personal finance, if they teach it at all. Millions of high school graduates head into the workforce never knowing anything about payroll deductions, taxes or investments. Kids are left to learn about personal finance from adults, and many of us never really learned it ourselves. When teaching kids, make sure to make in interactive (pay bills online, writing checks or paying with cards at the store) and don’t be afraid to use your history (good or bad) as a source of examples.
Show them the numbers
Teach kids about what things really cost. When they are little, it’s easy to talk about the cost of the groceries and toys that seem to magically show up in the house. As they get older, show them how many hours you have to work to afford the car payment, for example. Talk about the additional costs of driving- including the insurance, gas and maintenance costs that allow them to get to soccer practice.
As they come closer to leaving the nest, share with them your actual mortgage statement. Explain all the associated costs of owning a home. Be open and honest about things you have learned and mistakes you have made in your own financial journey.
Make them pay
As kids gain privileges, have them share the costs. They should chip in to pay for part of their phone, iPad or game system. When they learn to drive, have them share the responsibility of gas and insurance. Together, you can sit down and brainstorm ways for them to earn the money that will help offset their expenses- including doing chores or creating their own entrepreneurial endeavors.
Teach the importance of taking care of themselves
At first glance, eating right, exercising, getting sleep, managing stress and staying hydrated may not seem to correlate with financial stability. But an unplanned diagnosis can financially derail people in our current landscape of skyrocketing healthcare costs. Establishing healthy habits at a young age is much easier than changing unhealthy ones later on in life. A lifetime of healthy habits can help avoid many pricey and preventable conditions.
Choose a college wisely
There is more student loan debt now than any other time in history. A recent Bankrate study shows that student loan debt can delay major financial milestones, such as buying a home or getting married, for millions of grads. It can also force them to choose careers they may not enjoy, just to pay off their loans.
Encouraging your child to attend a public, in state university can reduce your costs by tens of thousands of dollars a year, while not compromising on the quality of education they receive. According to School Psychologist Dr. Sylvia Rimm in her book How to Parent So Children Will Learn, “you shouldn’t be expected to make major economic sacrifices in your own lives when less expensive, good quality alternatives are available. The proximity of a college doesn’t diminish its quality, but it often greatly reduces the cost.”
Dr. Rimm speaks from experience. She and her husband both hold advanced PhD degrees, as do their 4 adult children. Their children all attended undergrad programs at an in-state college and subsidized their ivy league PhD’s with graduate or teaching assistantships.
Attending community college is another way to offset the cost of higher education. Another idea is to take college courses while in high school. Many school districts offer college courses at no cost to families- some of them are even offered on the high school campus. Up to two full years of college can be obtained while still in high school.
A family should absolutely not forgo saving for retirement in order to fund an expensive, private or out of state university. While there are ways to fund college education, there are no loans to fund retirement. With some thoughtful planning, proactive steps and clear expectations, your adult children can feel the success of achieving financial independence and you can focus on building security for your well-deserved retirement years.