Sandwich Generation: Your Children

Investor Self-Defense

Your children are watching and learning from you. Have an open dialogue about the importance of financial planning and show them how to investigate before investing. They should understand the relationship between risk and return and should ask themselves: What are my future cash needs? Will this investment allow me to have access to funds to meet future cash needs with significant penalties?

As an example, your children may be interested in investments that allow them to save money to buy their first house, or fund their educational expenses. Teaching them about various investment opportunities now will help them become more self-sufficient when it comes time for that down payment on a house or tuition. A little education with your children now could end up saving YOU a lot of money in the future.

Starting The Conversation

One of the most important things you can do for your children is to talk to them at an early age about responsible financial management. In addition to having them involved in household financial decisions (as age appropriate), you should model this behavior yourself. Children raised with money management skills will be better prepared for their own financial success.

As parents, you know that children are a significant financial obligation. Consider the costs of higher education. Often, parents of a college-bound child resort to utilizing their retirement nest egg to finance their child’s college education. This is not always the best solution and may leave you financially strained. There are other resources available for educational expenses such as scholarships, grants, loans, work-study programs, various other payment options and 529 plans. There are no such resources available to fund one’s retirement. Establish, in advance, the expectations you have of your children with regards to their participation in their educational expenses.

Another financial consideration is that of “boomerang ” children. What might be the financial impact if a child returned home after you thought your “parental responsibilities” were completed? Are you financially prepared for this possibility? Should this situation occur, it is imperative that you include this child in household financial decisions. State clearly and up-front what additional economic responsibilities he or she will have if returning home, such as contributing to the household income. If you don’t establish these expectations, you may find yourself facing significant financial issues.

By participating in discussions, decisions and planning, children will be better prepared and more accepting of the financial constraints their family may encounter.

Checklist

  • Teach your children about basic financial concepts and model responsible money management.
  • Consider the impact of using your retirement assets for your children’s education.
  • Decide if you are going to pay for your children’s education: Talk to your children about exploring education financing options.
  • Set financial ground rules and expectations when adult children (boomerang kids) move back home.

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