When Phil LeFavor, a retired high school vice principal in Massachusetts, helped his two 20-something sons get on their feet after they graduated from college, he knew he had to do it without hurting his own retirement security. "We could live to be ninety … I have to remain sensible about our financial plan for the future, too," he says.
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He invited both his sons, Will, 27, and Sam, 24, to live at home while they got started in their first jobs. He and his wife provided free housing, meals, and endless moral support. That assistance allowed Will to save up $40,000 for a downpayment on his first home, and Sam to land a job with the federal government that required months of interviewing. "We said, 'You can stay as long as you've got a plan. You're not going to stay here and blow money,'" says LeFavor.
That's just the kind of limited support that advisors recommend for baby boomers who want to help their 20-something children just as they enter retirement themselves. "I understand the desire to put your children first, but no one is going to give you a loan for your retirement," says Jim Stoops, vice president and financial consultant at Charles Schwab. Still, he acknowledges that many parents can't help but put their children's needs ahead of their own.
The new book Not Quite Adults says such assistance can be critical to 20-somethings starting their careers. Those without involved and supportive parents often find themselves struggling, especially in today's difficult job market.
But parents are financially stressed, too, which could eventually put even more financial pressure on their adult children. "Are your kids going to be willing to take care of you in your old age when your retirement savings run out? Ask any potential student that question and you can be sure they'll come to attention and pitch in more to help with costs," says Carmen Wong Ulrich, author of The Real Cost of Living.
Here are four ways to help your grown children without ruining your own financial security:
1. Budget for any support you plan to provide. LeFavor knew he and his wife wanted to pay for their sons' college educations, so they planned for that expense in advance. "It was already built into the budget. I had thought about it from the time I got married, and before we had kids. We put aside money for later," he says.
Ulrich says that in addition to saving for their own retirement, parents should also put cash away—even just $20 a week—into a 529 plan or other type of college savings account. "Figure out a way to do both, especially if you have access to a 401(k)," she says. "Raise those contributions when you can and automate some college savings as well." If you can't afford to do both, set a time line for when you can begin saving, Ulrich suggests. But be sure to save for retirement before college costs. "You need to take care of your today in order to take care of their tomorrow," she adds.
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Dawn Jurkovich, a senior financial advisor at Ameriprise, says that new parents often find the first five years of a child's life incredibly expensive, with daycare, diapers, formula, and other costs, so she sometimes suggests waiting until the child begins school to start saving for college. "Once you don't have daycare costs, you can turn that money into a college savings," she says.
2. Provide non-financial support to adult children. By inviting his sons to live at home, LeFavor and his wife saved them significant sums of money without putting too much strain on their own budget. "Except for the grocery bill, it's not that much more to have them around," he says. Parents can also provide job-hunting advice and emotional support during those turbulent post-college graduation years.
3. Make a plan—and tell your children to have one, too. "I had no qualms about helping them as long as they had a plan," says LeFavor. Advisors recommend talking openly about how long your children plan to live with you (and how long you want them to stay), whether they should pay some type of rent (perhaps in the form of chores around the house), and what steps they are taking to become financially independent.
4. Teach your kids about money early. "Instill in children the importance of saving [for college], too, through their own earnings," says Stoops. That demonstrates the value your family places on higher education, and also teaches children how to save.
Parents can also demonstrate the importance of savings by setting a good example. "I brown-bagged my lunch, I never stop at Dunkin' Donuts, and when I do, it's a treat. My wife and I had those conversations over the years and it rubbed off on them," says LeFavor. With both his sons now financially independent and gainfully employed, his hard work appears to have paid off.
Kimberly Palmer is the author of the new book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back .