Whenever I talk to people about retirement, they always have two main questions: When can I retire, and how much can I afford to spend? Most of us would love to leave the workforce while we’re still young enough to enjoy our latter years, with as much money in the bank as possible. It’s the epitome of a successful retirement: to have the time and funds to live out that chapter to the fullest.
It’s no secret that the key consideration when seeking to build a retirement plan is whether or not a lifetime of savings can support and sustain a particular level of spending. So when answering people’s questions, the first thing I always ask is how much money they have saved, and what they are putting away each month. We then look at what they are hoping to spend their retirement money on.
We all have our own unique goals, bucket lists, and dreams of growing old free from financial fear. Most people can give me very detailed descriptions of what they’d like their retirement to look like. But whenever I speak to people with children, one major consideration I find gets overlooked time and time again, is whether or not your kids will need financial support in adulthood.
The #1 Childcare Cost People Forget
If your spending in retirement includes supporting adult children, expected or otherwise, it can have a major impact on whether or not you can retire, what you get to do in retirement, and your overall financial peace of mind.
Some parents might find their children in the awful situation of being unable to work due to illness or injury, and unexpectedly need your financial support. But for many others, it may simply come down to the fact that they didn’t "figure it out" financially for themselves when they were still under your roof.
For those of us with kids, it’s always advisable to include a buffer in our retirement savings that accounts for being able to help them in any time of need. But unless you’ve accumulated vast wealth with a goal of supporting your children for life, it’s also vital that we raise our kids to be fully prepared to stand on their own two feet when they reach adulthood.
It can be an incredibly touchy subject to address. Money unfortunately remains a taboo in most households. But if you’re seeking to build a secure retirement for yourself, educating your kids about finance can help ensure they don’t rely on you unnecessarily, and take ownership of their financial independence with confidence and success.
When Should You Start Financial Education?
Money might seem like something you can talk about "later". But in delaying your child’s financial education, you are doing both them and yourself a disservice. The sooner you can start building their awareness about money and financial literacy, the better. Waiting until they reach graduation is definitely going to be too late to create indelible money habits.
It can be hard to see the impact of small amounts of teaching day in and day out. However, we know all our kid's activities require practice and coaching. As parents we sit in bleachers during slow games, watching every kid on a field cluster around the soccer ball, and we listen to at-home recitals because these small, repetitive experiences build towards the varsity team or the band performance.
With finances, it is even harder to see the impact because it takes much longer. If talking about money is casual and normal in your family, just like the small incremental improvements in other areas of their lives, it could add up to have a huge impact – and ultimately help you retire sooner, and with more security.
A Tool to Help Teach Kids About Money
No matter how old your child is, it’s important to include them in financial discussions. You can do this in varying ways and levels of detail, but ultimately it’s important to take the time to explain how money works, and why you are making specific decisions. Every outing and activity is a teachable moment.
It is difficult to differentiate what money skills line up with brain development in early elementary compared to middle school or high school and beyond. A favorite tool of mine is the book Raising Financially Fit Kids, which provides the right language and approach for each age. It may be one of the most important tools in maximizing your retirement fund.
The first 30 pages of the book help you think through who your kid is and what might work for them – and you. It’s a great way to help you establish your money mindset both as an individual, and a family.
The rest of the book is then dedicated to breaking out the ages and stages and applying the right skills for the right age. Each age has a helpful table that addresses the ten basic money skills and how to apply them. You simply flip to the section that matches the age you’re working with and skip the other pages.
The hardest part of teaching kids about money is remembering that they are always watching and learning from our actions rather than our words. If you struggle with spending and money boundaries as a parent, your habits are clearly visible to your children. It's tough to teach kids great money habits when you don't possess them yourself. Often it takes some "re-parenting" yourself to parent your kids and teenagers.
Navigating Difficult Financial Conversations
Sometimes the hardest part of discussing money with your family is knowing how to actually start. If it’s not something you are typically used to talking about, you might be tempted to put it off, and miss out on vital education opportunities.
If you don’t feel comfortable getting started, then seeking the support and guidance of a financial professional can provide a huge source of confidence. At Truman Wealth Advisors we are open to having conversations with everyone in your family, including the kids, because it can really make the difference between a successful retirement plan and an unsuccessful one.
We appreciate when parents trust us with conversations about their kids and money – because they are two of the most delicate topics and often the combination becomes difficult. If you