How To Avoid Draining Your Retirement When A Child Moves Back Home

Many children believe that they will always be able to rely on their parents when they get into trouble. The only problem is that quite a few adult children have begun to rely long term on their parents for their living arrangements and helping them with their bills.

While most parents are more than willing to help their children where and when they can it is important for the parents to focus on their future as well. By the time a child graduates from college, the parents are often getting closer to the point of wanting to retire. Continuing to assist their child can greatly affect the timeline they have planned on for retirement.

We have all heard horror stories of children moving back in with their parents and draining the financial resources the parents had set aside for their retirement. There are several steps that you as a parent can take in order to avoid this situation and not only help your child be able to manage to live on their own but also maintain a healthy relationship with your child.

Make sure your child is aware the situation is temporary

It is much more difficult to try to set rules after your child has already moved into your home. You need to make sure you establish the ground rules before your child ever moves back in and let them know that you expect them to be followed or they will need to work something else out.

There are many reasons that a child chooses to move back in with their parents, but the leading reason is due to financial hardship. We are living in a tough economy, many people have accumulated quite a lot of debt and jobs are not paying what they did a few years ago. This has led to people losing their homes, destroying their credit and having a tough time finding a job. It can be a difficult situation for a parent to be in when an adult child asks to move back in, and this is why it is important for the parent to lay some ground rules for their child.

Check your Finances and Create a Budget

It is extremely easy for parents to hurt their financial future when they are trying to help their child. Before your child ever moves back you need to sit down and work out a budget. This means that you set aside how much money you will need for your bills every month, money to put into savings, and the money that you will need to put towards retirement. Make sure you take care of these needs first! Anything leftover can be used to assist your child, should you choose to do so. This may mean that your child must be responsible for contributing some financially in order to stay in your home, helping pay the increased costs of food, utilities, etc. The money that they contribute will most likely be a much smaller amount than they would be paying if they were living on their own, and you will not be putting your financial future in jeopardy.

Remember there is a difference between a gift and a loan

Your child may be in a desperate financial situation where they need some money from you in order to help get them out of it. Do not just give your child the money. Instead, agree that they will repay to money on a regular basis – even a small monthly payment is important to establish the fact that this is a loan and not a gift. You and your child should also agree on what the consequences will be if a payment is missed, just like a bank would do. This way your child will get the assistance that they need, but will also learn a little bit of financial responsibility along the way as well.

Re-teach them the basics of finance

Some children are so accustomed to having their parents take care of everything that they never learn to handle anything on their own. Helping your child is important, but it is actually more important to teach them financial responsibility so they are not back in the same position in just a few years. Try to sit down with your child and help them to work out a budget. It might be a good idea to make this one of the terms of your allowing them to move back in. This way you are helping them get back on their feet, but making sure that they will be able to handle things long after you are no longer around.

One final thought

Consider helping your child find a life coach who can help them focus on life goals and develop a plan for working toward attaining them. A clear idea of what is necessary to get a job or resolve financial difficulties and specific things they must be doing are important for their success. An objective outside party can often have a stronger impact than parents.