Who Will Save You?


After reading this USA Today article by Bobby Allyn http://usat.ly/z1YnyT I realized how many times I have heard this story before about parents sacrificing their own future livelihood (retirement) in order to financially support their grown kids.  Parents helping out in ways such as buying cars and putting down payments on homes, as the parents who are featured in the article did.  The parents in the article paid the down payment and also became cosigners on a house for their daughter and her boyfriend.  This move on their part raises numerous red flags!  First and foremost if a child or any adult for that matter needs a co-signer on anything there tends to be a reason on the part of the bank for this requirement and it is that the bank knows this person eventually won't be able to pay and they need someone with money(co-signer) to go after when the bill comes due.  Also these parents in the article also left the mortgage payment up to their daughter and her boyfriend (not husband), so if they decide to no longer be a couple then the daughter may not be able to afford the mortgage and now the parents have to sacrifice more future retirement income to pay for a home they don't even live in!

Parents have to trust that they have raised their children right and know when to cut the umbilical cord because if they don't they risk ruining their retirement savings and having to work longer than 65 years of age. Remember adult children are younger than you and can work two or three jobs to obtain that dream house or car so don't be afraid as the parent to tell them "NO".  We all have to stand on our own two feet and become responsible for our own lives.  One exception I do have is that if you as a parent have retirement covered and your financial adviser has said that you can't spend all the money in a lifetime($1 mil+) then helping out a child in NEED to get back on their feet financially is understandable.  For the parents with young children such as myself you can take two small steps now to get your kids on the right track financially:
1. Start a 529 Plan which is a college savings plan because this will allow the child to go to college for free and not graduate with student loans. These loans can be overwhelming for someone starting out on their own.
2. Teach them how to save and budget their money. Also don't pay for all their "wants", but instead when they are old enough have them get a job to make their own money and you will soon find out when they work for it they save more and spend wisely!

Question: Whether you are a parent or an adult child can you relate to this article?

Till next Wednesday!