Saving for retirement is complicated enough when you’re single, but it gets a lot more challenging when you have children. You need to balance your financial needs against theirs at least till college, if not beyond. In all this, how can you manage effective retirement planning ? Make your kids a part of it!
Let’s look at why, and which aspects of retirement planning you should share with them:
1. They Will Remain On the Same Page As You –
You should talk about your retirement goals with your kids, so they understand what you want to do and how you plan to do it.
This will help them do what they can to help you along the way, whether in terms of cutting down unnecessary expenses or pitching in to help pay the bills as they get older. When you and your family are on the same page, it becomes easier to work on achieving goals together.
2. They Will Understand Your Role in Their Life –
And, vice versa. It’s important for your kids to know what you can and cannot do, as well as how much you’re willing to do for them.
Make them aware of any security you can provide in case of unforeseen circumstances, such as emergency funds or insurance coverage. Be honest with them, so they realize your abilities, limitations and expectations alike. Most importantly, trust them to understand that you’ve done the best you could.
3. They Will Learn from Your Successes and Failures –
No one’s perfect, even financial geniuses. You’ve probably made a few mistakes in your life, but it’s equally likely that some choices paid off.
Tell your kids all about your retirement planning strategy, what worked and what didn’t, as well as any techniques you feel they could use to their advantage. Hiding your shortcomings doesn’t help them, since they may end up making the same mistakes if they don’t have your experience to help guide them!
4. They Will Make More Informed Life Decisions –
Right from childhood, your kids start making independent decisions based on what they’ve learned from you and others around them. Knowledge is power, so give them the tools to help them make wiser choices as they grow older.
What they learn from you will impact their choices in terms of:
· Education – Student loans are easy, retirement loans are not. The school your kid chooses to attend should not wipe out your savings. Even though you may think
you are protecting and providing for your child by giving them everything they want now, it won’t help if you’re a financial burden on them later.
· Career – The right career choice can make or break your child’s financial future, but it also affects your own. A profession that requires an expensive education may lead to higher earnings, in which case your child could probably help with your retirement planning in addition to handling their own expenses.
· Spending – Budgeting and spending habits are developed early in life, and it’s hard to change them later. Teaching your children good financial practices now will help them manage money better throughout their lives, especially if they learn the importance of saving for retirement as well as a rainy day!
5. They Will Feel a Stronger Connection with You –
When you share your plans and choices with your kids, it strengthens the bond between you. Being clear about your retirement planning strategy also reduces the chances of family feuds over your estate, or ill will between surviving members after your demise.
Your kids will feel more secure knowing why you made these choices too. For instance, you’re putting money in an self directed IRA or self directed 401k so you don’t have to ask them for it later, or you’ve invested in a college savings fund to help them pay for college by instead of buying them that expensive new phone!