Helping Your Grown Children Financially

Helping Your Grown Children Financially

According to the Retirement Re-Set study by SunAmerica Financial Group, nearly half of Americans 55 and older say they expect to provide support for aging relatives and adult children while simultaneously saving for their own retirement. This sandwich generation of adults should consider the following Kiplinger tips to financially helping their children.

Aim for a one-time gift. “If you can spare the cash, give your adult children a lump sum for them to budget rather than just paying their expenses or paying off their debt, and make it clear that’s all you are willing to give,” advises Kiplinger’s Kimberly Lankford. This will generally encourage them to stretch the funding and cut out nonessential expenses.

Only offer essential assistance. If handing over a chunk of cash is not appealing, only offer to help pay for a few critical bills, such as health insurance or car insurance so coverage is never lost.

Rule your home. If you allow your child to move back in when they can no longer afford rent on their own, make sure they know what you will expect before they make the move. It doesn’t hurt to draw up a lease for your own home that outlines any required rent, chores and time allotted. “Some parents let their kids stay at home for a given number of months, then charge rent after that, setting aside the money to build up an emergency fund or savings the kids can use for rent or other expenses when they do move out,” Lankford said.

Look for options to save together. If your children are in college, or under the age of 26 and without jobs, you may be able to add them to your health insurance policy for a lower cost than a stand-alone health insurance policy. The same goes for car insurance. You may also want to consider consolidating your cell phone expenses into a family plan.

Many in their midlife may find themselves balancing between financially helping their retiring parents and their grown children. If you or someone you know finds yourself part of this sandwich generation trying to balance between the two while continuing to save for your own eventual retirement, contact a financial adviser for a consultation and review of your portfolio and budget. A financial adviser can help you explore the options available for you and your family.

FINANCIAL FACTS

Started Tuesday – The health insurance marketplaces (HIMs) mandated by the Affordable Care Act (ACA) went live last Tuesday, Oct. 1, 2013. The ACA was signed into law by President Obama on March 23, 2010, (i.e., three and a half years ago) and is intended to create a competitive market in the health insurance industry.  Millions may ultimately purchase health insurance via the HIMs (also referred to as “exchanges”), but a focus of the law is the 41.3 million uninsured Americans (source: Health and Human Services, BTN Research).

Just Do It – The Affordable Care Act required all 50 states to establish a health insurance marketplace (HIM) by Oct. 1, 2013. Fourteen states opted to build their own HIM, e.g., California. Twenty-six states ceded the duty to the federal government, e.g., Texas. The remaining 10 states elected to establish their HIM in partnership with the federal government, e.g., Illinois (source: BTN Research). 

You Are Set – Full-time employees working for big companies (> 50 employees) that are insured through their employer and seniors on Medicare are not impacted by the health insurance marketplaces from the Affordable Care Act. Big company full-time employees covered by an existing group plan at work that is effective through a date in 2014 will continue to select their health insurance during their employers’ open enrollment periods. Medicare beneficiaries will continue to go to www.medicare.gov to sign up for Medicare, but not for their supplemental plan coverage (source: BTN Research).