Are your kids holding you back from your retirement savings plans? (+ Special Offer)

These days there’s a lot of focus on the failings of millennials and their predilection for instant gratification and the infamous smashed avocado. What we don’t often talk about is where their parents might be letting them down.

By that I don’t mean failing to teach them basic manners, their times tables, or not making them eat their greens.

Where it seems to be consistent neglect is in teaching kids to be financially independent – a situation which can result in both the kids’ and the parents’ financial futures suffering.

In my experience, children are one of the biggest factors holding back my clients’ retirement savings plans. Not their tweens and teens, but adult children, who aren’t really adult-ing all that well, in that they’re not paying their own way in the world.

Boomerang kids, KIPPERS, failure to the launch, entitled dependence – call it what you like, but there’s no doubt it’s a growing phenomenon.

According to the 2013 census, (which is the latest available data) 150,000 young adults aged 20-34 live at home, up almost 30% since 2001. Research by Rabobank a few years back found children expect to leave home around the age of 27.

In the United States the data is more up to date, and more stark. A Real Estate Analytics Company called Trulia found almost 40% of young adults live with their parents, grandparents or other relatives, a level not seen since 1940 when the country was recovering from the Great Depression. Research by the Pew Research Centre found more Americans aged 18-34 live with their parents than in any other living situation like flatting or living with a spouse.

All parents, including me, want their kids to get ahead, to have a better life, and it’s natural to want to rescue them when things go wrong. But in helping your kids you need to ensure you’re not depriving them of valuable lessons, or depriving your own retirement savings fund.

Some adult children are undoubtedly living at home to save for a deposit for a house of their own, and we all know that’s a more onerous task than ever, but even in this situation you shouldn’t be issuing them a blank cheque to pay nothing and stay as long as they like. In my experience, however, it’s more common for kids to living at home much longer because it’s easier and cheaper and that gives them more time and money to spend on themselves.

If you have an adult child living at home you need to seriously consider: is this situation their wealth strategy, or spending strategy? Are they getting ahead with your help, or just getting comfortable thanks to your help? Would tough love be more effective than free board or constant cash injections?

I am a firm believer that if they’re living at home they need to be paying board – and no, $50 a week will not do – respect them enough to charge them for their living costs. Some parents have a hard time accepting money from their children, but my advice is to take it – it’s a lesson about the costs of the real world. What you do with it after that is up to you. If you want to squirrel it away to give back to them in a lump sum later, fine, but impose the discipline of paying your way first.

Obviously, there are some circumstances where your kids need to use you as a safety net, but don’t let them confuse you for a hammock. Unemployed adult children need to be actively looking for work and contributing what they can to the household costs. You need to be assured your kids are working as hard and sacrificing as much to get ahead as you are to help them.

It’s only once you’ve re-launched your fledglings that you can focus on your own financial future.

By Hannah McQueen

One of NZ’s leading experts in personal finance, author and founder and director of enableMe.
Hannah is also a columnist on GrownUps.

Special Offer for GrownUps

If you would like a financial consultation with Hannah’s enableMe team, simply fill in the form below and the enableMe team will be in touch. As a GrownUps member you will get a $200 discount, on your initial meeting (normally $300 + GST), discounted to $100 + GST.