A Plan for Your Children Could Save Your Retirement

Steps you take when they’re young could launch them toward financial independence and get them out of the nest with no hurt feelings

Financial advisers are adding a new wrinkle to retirement planning: a launch plan to prepare clients’ children to leave the nest when they’re grown adults in the not-so-distant future.

This can get touchy. Some parents are reluctant to think about letting go, or give higher priority to supporting their children’s academic success at the expense of their long-term financial well-being. For others, talk about money is taboo.

For teens, asking about parents’ finances is like asking, “How many times do you and Mom have sex?” says Deborah Frazier, a Chapel Hill, N.C., financial planner.

Preparing children and teens to support themselves, however, instills crucial money-management skills they may not learn in other ways.

Financial adviser Matthew Papazian makes launch planning for clients’ children a part of mapping out retirement. One couple he advised saw their retirement plans derailed after they helped an adult child buy a house he couldn’t afford on his own. Mr. Papazian often offers to talk with clients’ children to coach them on financial skills. But persuading parents to back off “is harder than I ever imagined,” says Mr. Papazian, founding partner of Cardan Capital Partners in Denver. “Parents like to be proud of the lifestyle they provide their kids.”

Kim Kenawell-Hoffecker uses financial modeling to help parents anticipate how providing varying amounts of support for their adult children will alter the date they run out of money in retirement. “Showing the end result to the parents can be eye-opening,” says Ms. Kenawell-Hoffecker, founding partner of Avantra Family Wealth in Mechanicsburg, Pa.

One-third of young adults ages 25 to 29 in 2016 were living in multigenerational households, typically with their parents, a recent Pew Research study shows. And for the first time in more than a century, more 18-to-34-year-olds in 2014 were living with their parents than in other setups, including with a spouse or partner, an earlier Pew Research survey shows.

Some parents who provide financial support simply enjoy keeping their children close. And many young adults genuinely need help. The rising cost of housinghealth care and other essentials has been outpacing gains in entry-level salaries in recent years.

But other parents use handouts as a way of controlling their children, says Kate Levinson, author of “Emotional Currency.” They may be anxious about their children’s ability to fend for themselves, sending the message, “I don’t believe you can make it, so let me help you,” says Dr. Levinson, a marriage and family therapist. Nearly half of adults in their 20s still receive some financial support from parents, says a 2015 poll of 1,000 adults ages 21 to 29 by Clark University.

Parents who give a child more money than they can afford risk creating what Dr. Levinson calls a toxic situation.

Some parents don’t think they know enough to coach their children on managing money. But all teens want is basic know-how that can be shared by any parent who manages household expenses, regardless of whether they can afford a financial adviser. Some 96% of 128 college students in a recent study said they wished their parents had taught them practical skills, such as budgeting and saving. Parents’ teaching has more impact than taking financial-skills classes in school, according to the study by researchers at Brigham Young University.

Becoming self-reliant “starts with the mind-set that you can do it,” an attitude parents can start to instill early, says Deborah Meyer, a St. Charles, Mo., financial planner.

Learning about saving and comparison shopping can start in childhood. Parents might ask, “Do we really need to buy those Ugg boots?” and let the child earn money to pay the premium, says Lisa Bayer, principal of Opus Financial Solutions in Boulder, Colo.

Teens benefit from holding a job and learning to budget. Ms. Kenawell-Hoffecker sometimes meets with clients’ teenagers and shows them their parents’ budget, including their income minus housing, taxes, health insurance, clothing and groceries.

For many teens, this is the aha moment when they realize how much their parents sacrifice to pay for college, Ms. Kenawell-Hoffecker says. She recently met with Sean and Terri Carroll’s two teenagers, ages 17 and 18, and coached them on budgeting earnings from their summer jobs.

Sharing a joint credit card account with a parent and helping make payments is good training. One student in the BYU study told researchers that he once thought, “Oh, they’re going to give me student loans? Awesome!” the study says. Looking back later, he realized he could have lived on half the amount he borrowed.

Parents should start talking with their children early in high school about what they can and can’t provide for college, and again in junior year when they prepare to apply, says Jeffrey Jensen Arnett, a psychology professor at Clark University and author of “Getting to 30.”

Debra and Ron Leimkuehler of St. Charles, Mo., worked with their daughter Rachel, now 20, on deciding where to spend the college savings they’d set aside for her, pointing out their money would go further at certain schools, Ms. Leimkuehler says. “We have discussions about picking the right major: ‘What are you going to do with that and how are you going to support yourself?’ ” she says.

Having children shoulder at least part of their college costs is a good idea so they have skin in the game, says Ms. Bayer, the financial planner.

When Dennis Quimby’s daughter, Rachel, was 18, he persuaded her to start a Roth IRA with her earnings from a fast-food job, rather than buying the car she wanted.

“I want my kids to have the good life. And the good life, in my opinion, includes financial independence,” says Mr. Quimby, of Champlin, Minn. He also had Rachel meet with his financial adviser, Ms. Bayer, to help her invest her savings.

Saving seemed pointless at first, says Rachel, now 21 and a college senior. “I kind of fought my parents on it.” But soon, watching her money grow became cool. She’s still making deposits from her earnings as a server at a campus restaurant.


  • Start teaching basic saving and comparison-shopping skills when children are small.
  • Require teens to earn at least part of their spending money.
  • Teach teens how to make a budget and give them practice sticking to it.
  • Share and discuss the basics of your household budget with your child.
  • Give teens practice using checks or credit cards to pay for their activities or sports.
  • Start discussing what you’re willing to pay for college by the time a teen enters high school.
  • Talk with your child about your own financial lessons and missteps in the past.