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Making your kids be financially independent is important if you want to be ready to retire when the time comes.
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Your children have grown up and graduated from college. They’re doing the “adulting thing,” as they may say.
No longer paying tuition—if you were footing the bill—is a financial relief in itself, but here are more steps you should take to make sure your adult children don’t jeopardize your retirement plans.
Make saving a priority.
Without the financial pressures of your children’s tuition bills, your cash flow should increase significantly. Instead of celebrating with an overpriced vacation, keep your spending modest and put more money away for the future. This way, your retirement feels like a vacation and you’re less stressed about finances later.
Kick them off your insurance.
New regulations allowing your kids stay on your health plan until they turn 26 do not mean you have to let them. If their company offers employer-sponsored health insurance, it may be cheaper to have them start their own policy than continuing to keep them on yours. Some employers even cover the full cost of health insurance, making the decision to kick them off a no brainer.
That means the car, too.
At this age, if your kid owns a car, he or she should no longer be on your car insurance. Because young people have reputations for being poor drivers, removing them from your policy will likely lower your liability costs. Plus, because they probably don’t own much, their limits don’t have to be quite as high.
Understand your own situation before helping others.
More than half of young adults report that they would not be able to afford their current lifestyle without ongoing financial support from their family. While you are of course welcome to help your kids in any way, it is vital that you make sure you can afford it. Don’t put paying Junior’s rent over saving for your retirement and DO NOT make early withdrawals from your 401(k) to give him a down payment on a house.
Side hustles and second jobs are normal for young adults, so don’t feel bad for saying no if financially supporting your grown children is not in your best interest.
The lesson:
Once you’re finished paying for your children’s college, you’re able to start focusing again on saving for your financial future—but there are more steps to take to free up as much of your current income as possible. Making your kids be financially independent is important if you want to be ready to retire when the time comes.