Four ways to stop your adult children derailing your retirement savings!

The Bank of Mum and Dad is a familiar concept and none of us can bear to see our children struggle financially, which is why many parents continue to provide for their offspring even when they’re grown-up. Instead of being ‘empty nesters’, many parents find that their children return to the family home straight after university (that’s if they ever left in the first place!) due to the difficulty of getting a foot on the property ladder.

The kind of financial assistance given can take many forms, such as ongoing support towards bills or rent, or money towards a car or a house deposit. Whilst it’s only natural to want to help, it’s important not to put your child’s finances before your own retirement. Or else, in the end, no one wins. We look at four key ways to help maintain a balanced view point.

Make sure you understand your retirement objectives and your own financial situation

Before you jump in and agree to help your son or daughter, make sure you’re clear about your monthly budget. What are your regular commitments at present? Will spending increase or decrease in the years ahead? What are your personal retirement aspirations? Will you still be able to live the life you want if you’re supporting your children financially as well? As a general rule, you need to be able to substitute at least 70% of your pre-retirement income once you cease work. You may also have specific home improvements in mind or plans to travel more. It’s essential that you remember to factor in any potential care costs too.

Sit down with your children and have an honest discussion

If you’re frank about your own finances and the level of support you can provide, this essentially sets a good example to your children at a time when they’ll be learning to manage their own finances. It also allows you to set limits, discuss timescales and clarify expectations. Be precise: are the funds to help with bills, a rent deposit or something else? At times, an ‘independence fund’ can work well—a one-off payment to help an adult child as they enter the ‘grown-up world’.

A different perspective

Every now and then, it helps to get input from a third party, such as a professional financial adviser who can provide some valuable objectivity in what can be a sensitive situation. If you all sit down and assess your financial plan collectively, it makes it easier for everyone involved to see the impact giving or loaning money to your children could have on your own financial situation. Keep in mind that if you did go too far, you could end up having to rely on your offspring for financial support and the last thing anyone wants is to become a burden in later life.

Put it in writing

If you do come to a decision to gift or loan your children some money, it can often make sense to make the arrangement formal. It gives both you and them something to refer back to in the future and means they’ll take the arrangement seriously. It also sets expectations in terms of timeframes and any repayments. Make sure you revisit the document on a regular basis to ensure it remains appropriate. For example, circumstances could change—your child may get a promotion or you may have incurred some unforeseen expenses.

If you have any questions around this topic, please feel free to get in touch with us directly on 01789 263888 or email