This newsletter focuses on an increasingly relevant topic as our clients' adult children experience growing financial stress - or the pressure of sustaining a lifestyle comparable to that of their neighbours. The answer is not as simple as parents stepping in to 'fix' financial woes. Consider the implications I mention in my lead article, and assess what is best for your family - each situation is unique, and it is all about meaning and balance. Retirementor, Alan Hosking, comments on living our own stories for additional insight.
Your financial plan is on track: you have saved and budgeted for a lifetime and are ready to enjoy your retirement, with enough to fund it. But ... there is a snag - your reluctance to relinquish a particular role you have been playing for years: your children's provider, even if those children are now income-generating adults.
As a retiremeant specialist, I have encountered many clients with grown-up children who still rely on their parents financially. Recently, I had to consolidate my thoughts on this issue as I was invited to contribute to an article by Lorraine Kearney in Personal Finance
(click here to read the full article).
My conclusion is this: for the most part, you are not advantaging your adult children in any way by enabling them to rely on you for financial support ... and, you are putting your own future financial well-being at risk.
Our responsibility as planners at Chartered is to ensure that our clients have sufficient money to see them comfortably through their retirement - thereby not becoming a burden to their families in the future.
Sometimes, we see clients with just enough money for that purpose, and our role is to invest it properly and encourage our clients to stick to their plans ... but emotions are very much a part of relationships and parents find it difficult to see their children having to weather the vicissitudes of life: wanting a home and needing a deposit; sudden unemployment; the effects of divorce; or, sadly, an alcohol or a drug dependency.
As a mother of three, I know that our unconditional love for our children means we more readily give to them than to ourselves.
As a financial planner, however, I know I best fulfil my role by being objective where my clients sometimes cannot be: not being emotionally involved allows us to see the consequences of our clients' decisions. We are respectful in this and realise that the final choice rests with our clients.
Sometimes clients have additional assets, and the discussion then centres around the legacy that they will leave - the children will inherit substantially. Two courses of action lie ahead for the client who is aware of not taking away the recipients' sense of worth and need to prove themselves. Parents then still want their children to inherit in the future, rather than when they are still shaping their financial independence.
Alternatively, I encourage clients to spend money creating experiences: that family holiday you have always dreamed of - go ahead, make some wonderful memories; your involvement in your grandchildren's education - yes, pay the school fees if you wish, but also share some of your passion for, say, nature, by teaching them bird names.
Whatever the clients' approach, I am a strong advocate of adult children being involved in financial conversations. This way, they learn the skills to manage money to set them up for future prosperity. The thought required for robust discussions are valuable to each member and ensures your financial plan gives your money more meaning.
MONEY + MEANING = MAGIC