Retirement Life
26 January 2024

Why children are a lifelong financial commitment


Bringing up children is expensive. It’s estimated that it costs around $300,000 to raise a child to the age of 18 on a medium budget. So, when the youngest child finally enters the workforce, most parents breathe a sigh of relief. However, that relief can be short-lived. Parents of adult children will tell you that children can be a lifelong financial commitment. That’s because life doesn’t always go smoothly and every now and then, for a variety of reasons, Mum and Dad are called on for a bit of help.


As families expand and evolve.

Early in adulthood, kids in between jobs or flats or returning from overseas come home to save money and get their washing done. Paying off a student loan or buying a first home sometimes require a bit of parental assistance. Then there’s the arrival of grandchildren and the struggle for many young families trying to cope on one income. Of course, relationships don’t always last and single parents often turn to Mum and Dad again to help them through the tough times.


Along with all of these significant events issues can also arise from mental and physical health problems. Health problems can lead to adult children being in low paid or part-time work, or unable to work at all, or incurring large debts due to addictions or inability to manage money.


Calculate what you could draw in retirement.

When things don't go to plan.

It would be a cold-hearted parent who didn’t help their adult child in time of need. On the other hand, children shouldn’t expect their parents to help them out every time something goes wrong. There are some basic principles that should be followed when giving financial assistance to adult children.


Take care of your own needs first.

Some parents say they would give the shirt off their back to help their children. That’s a very generous approach but it can create another problem. Parents who give too much to their children can jeopardise their own financial future, especially their retirement, and then have to rely on other family members or social welfare to survive. Take care of your own basic necessities, including setting aside enough for long-term needs, before you help others.


Encourage your children to take responsibility.

Bailing out your children every time they stumble doesn’t help them become self-sufficient. People learn by experiencing the consequences of the decisions they make - good or bad. Of course, it’s a different story if there are health issues involved. The aim should be for children to be as self-sufficient as they are capable of being.


Take precautions with large gifts of money.

If your adult children are in a relationship, be careful about giving a large sum of money, as it might become relationship property and be shared with your child’s partner if the relationship ends. It is perhaps safer to lend, rather than give, large amounts. A loan should be repayable on demand and recorded in a signed legal document. Keep in mind that favouring one child with financial support can lead to sibling rivalry, either during your lifetime or when you’re no longer around.


Don’t take uncalculated risks.

Sometimes an adult child might ask you to guarantee a loan or offer your home or other assets as security for a loan. Always get expert advice before entering into any such arrangement so you can fully understand the risks involved and assess whether you have sufficient financial resources to withstand any loss that might arise.


Plan your estate.

Your will can take into account extra financial support given to a child during your lifetime, which might help minimise family conflicts. For children who have ongoing and significant problems with managing money, particularly if there are mental health issues involved, consider setting up a trust through your will. The trustees can then ensure funds are used appropriately to benefit your child and/or grandchildren.

Project your retirement income.

Of course, in some families the tables are turned and older parents in particular can require financial support from their children. But, that’s a topic for another day!


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Written by:

Liz Koh

Liz Koh is a money expert who specialises in retirement planning. The advice given here is general and does not constitute specific advice to any person.

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