Are your kids wrecking your retirement planning?

By admin
23 April 2014

It’s easy to see how adult children who won’t leave the nest might ruin your retirement planning. But financial experts say this isn’t the only way putting your children’s needs before your own could create problems for your financial future.

It’s easy to see how adult children who won’t leave the nest might ruin your retirement planning. But financial experts say this isn’t the only way putting your children’s needs before your own could create problems for your financial future.

Start saving today

Lara Warburton, managing director of Imara Asset Management SA, says parents often leave saving until later in life because they feel their children come first. But she warns that ducking the question of saving for old age often means you wreck any hope of adequate retirement provision. “Sometimes a couple reach their sixties before reordering their priorities and putting their own needs ahead of their children’s. By then even the best financial planner is playing catch-up,” she says. “It’s better late than never but only so much can be achieved in perhaps five or eight years of provision.”

Warburton says she often deals with the following scenarios:

  • Divorce and creation of a second family.
  • Having more children later in life.
  • Rising education costs.
  • Children who continue their education into their late twenties.
  • Failure to launch from the nest: when parents meet a child or children’s living and housing expenses for years longer than expected.
  • Financial problems encountered by adult sons and daughters who then seek parental assistance.

Plan ahead

In these scenarios early planning is key, Warburton says. “A dispassionate assessment is also required in cases of longstanding parent reliance. But the heart frequently overrules the head and caring parents drift along for years, draining their own savings to help their children.”

When older clients are in this situation a seasoned planner tries to repair their finances after the damage has been done. Warburton believes a more proactive approach – much earlier in life – should be taken.

Teach your children financial lessons

“Pocket money and target-setting from a young age could be the answer. Make children responsible for saving something for themselves,” Warburton says.

“I hear stories of instant gratification. A child wants something, goes to Mum and Dad and gets it without putting in the time and effort to reach the target themselves.”

She adds, “It’s no surprise that later in life these children get all the adult toys, over-commit themselves, get into trouble and go back to Mum and Dad for money. Build a sense of financial responsibility early on and many problems stop before they start.”

Get help here

For more information or help with retirement planning, go to www.imara.com or contact Lara Warburton.

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