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The financial implications

It’s a common scenario. Your adult child calls you. There’s a problem, and he needs money – again. You want to help, and you have some money in savings, so you write the check or make the transfer. A month or two later, the details repeat. This could keep going on forever, and if it does, your financial plan for retirement could take a big hit.

The Retirement Crisis

Retirement is expensive, and many people have saved little to nothing for it. According to the U.S. Government Accountability Office, among households aged 55 and older, 52 percent have no retirement savings.

While it’s hard to put an exact figure on the amount of savings needed to retire comfortably, many aim for a total around $1,000,000 or even more. Thanks to inflation, the amount needed keeps increasing.

Social Security benefits provide some income, but not usually enough to live comfortably. As of January 2018, the average monthly benefit is $1,404 for all retired workers and $2,340 for couples.

Competing Goals

While most people understand the importance of saving for retirement, actually doing so can prove difficult. Part of the problem is that most people have multiple goals competing for a limited amount of resources.

Younger adults are typically dealing with student loan debt while also trying to buy a house and start a family. Many struggle to make ends meet, much less save money for emergencies and retirement.

Older adults are often trying to catch up on their retirement savings, and it’s common for them to also help their grown children financially. On top of this, adults of all ages may have various types of debt, from credit cards to mortgages.

When there’s not enough money to cover everything, something’s got to give.

Finding a Balance

While it can be hard to say no to your grown children when they need help, a line does need to be drawn at some point. Finding a healthy balance is not an act of selfishness – it’s an act of necessity.

If your grown children keep asking for money, follow these tips:

  • Set a deadline. If you’re writing checks every month, make it clear that this can’t continue indefinitely. Discuss a clear end date.
  • Make sure the money is actually needed, not just wanted. This may require sitting down and discussing day-to-day finances to see where costs can be cut.
  • Call in the help of a professional if needed. A little guidance from a financial advisor might make it easier to get on the right track.
  • See if there are non-financial ways to help. If you’re already retired, for example, volunteering to watch your grandkids might make more sense than paying for daycare. Gifts of used furniture and other items can also make it easier for your kids to live on a tight budget.
  • Think twice before co-signing on a loan. If your grown child can’t make all the payments, you could be left on the hook for the remaining debt.
  • Don’t feel bad about saying no. At some point, young adults must learn to stand on their own two feet. Don’t be afraid to share your retirement goals with your kids and to explain why you must put your own financial needs first.

Still wondering if you have to say NO? Check out the latest facts about the rising cost of health care in retirement.