Your Best Retirement Plan: Financially Independent Children

I was working with Tim and Janet, two kind parents from Madison, Connecticut. They had worked hard to provide their children with good lives.

Neither of them came from money, and both paid for their own schooling. For that reason, they knew the value of a dollar. They also had a later start on wealth building than many of their peers.

Given how hard they had worked, they somewhat understood why their children had not. Their kids had only known them during the affluent years. Tim and Janet had children later than most, so their children never saw the early struggles.

Moreover, Tim and Janet realized that they were partly to blame.

They didn’t want their children to go through the same struggles they had. Both had worked through high school and college in a variety of jobs. Their children, more or less, did not.

Now they were worried.

Tim and Janet were in their 60s, and both of their children—now in their 20s—were not financially independent.

Their son had dropped out of college in the middle of his sophomore year. He bounced around from job to job and was now working as a restaurant manager. He was employed, but he still could not afford his own apartment.

Recently, when he turned 27, Tim and Janet decided it was time for him to move out of their house. The problem was that they were now funding his apartment, and they could not see when he would be able to afford it on his own.

Their daughter had finished college—in six years, after switching majors twice—at, as they put it, “a college most people have never heard of.” At 25, she had struggled to find anything beyond contract work and was still living at home.

This particular work had come to me through a subsidiary I built: Career Counseling Connecticut. But Tim and Janet both made the same observation:

“We wish we had met you when they were 15 and 17, not ten years later.”

Now they were anguished because they both wanted to retire.

“We’ve both been grinding since 22,” Tim said.

Janet interrupted him.

“More like since 12.”

They laughed, but there wasn’t much humor behind it.

They were burned out.

And here was the painful part: they could afford to retire.

At least, they could afford to retire if they were only supporting themselves.

Their retirement projections looked fine. Their house was nearly paid off. They had saved diligently. They had retirement accounts, Social Security coming, and reasonable spending habits.

But their retirement plan had one enormous variable that no financial calculator had adequately captured:

Two adult children who still needed their money.

The Retirement Expense Nobody Talks About

Parents spend enormous amounts of time thinking about retirement.

How much should we have in our 401(k)?

When should we take Social Security?

Should we pay off the mortgage?

Can we afford to travel?

Should we work until 65? 67? 70?

These are important questions.

But there is another question that many parents of teenagers rarely consider:

Will my children be financially independent when I want to retire?

Suppose you have accumulated $2 million for retirement. You might feel reasonably secure.

But what if you are also paying $2,000 per month toward an adult child’s rent, car, insurance, food, and miscellaneous expenses?

That’s $24,000 per year.

Do that for ten years, and you have transferred $240,000 before even considering the investment growth that money could have generated.

Add another struggling child and the numbers can become staggering.

More importantly, there is no obvious endpoint.

Helping your 24-year-old through a temporary rough patch is one thing.

Wondering whether you will still be supporting your child when he is 34 is something entirely different.

Start Thinking About This in High School

This is one reason I sometimes tell parents that college counseling is not really about college.

It is about adulthood.

The objective should not simply be:

Get my child into the best college possible.

It should be:

Help my child become a capable, motivated, financially independent adult.

Those are very different objectives.

A teenager who earns good grades but has no work ethic, no career direction, no practical skills, and little understanding of money may look successful at 17.

At 27, the picture can look very different.

Conversely, a teenager who works a summer job, learns how to deal with a difficult boss, develops marketable skills, thinks seriously about career options, understands the relationship between education and employment, and gradually takes responsibility for his or her own life is building something far more valuable than a polished college application.

They are building independence.

Don’t Remove Every Struggle

Tim and Janet had done what many loving parents do.

They wanted to make their children’s lives easier.

The irony was not lost on them.

The struggles they had experienced helped make them successful. Yet when they became parents, they tried to remove those same struggles from their children’s lives.

This is one of the great parenting dilemmas of affluent America.

We work hard so our children don’t have to struggle.

Then we discover that some struggle was precisely what taught us how to work hard.

I’m not suggesting that teenagers should be thrown into unnecessary hardship. Nor am I suggesting that parents shouldn’t help their adult children when they genuinely need help.

I am suggesting something more measured:

Don’t confuse removing obstacles with helping your child develop.

Sometimes the obstacle is the development.

A summer job matters.

Having a boss matters.

Being responsible for showing up on time matters.

Learning that you cannot buy everything you want matters.

Figuring out how much apartments cost matters.

Understanding what different careers actually pay matters.

Developing useful skills matters.

And discovering, preferably before age 25, that adulthood requires you to create economic value for other people matters enormously.

Your Child’s Career Planning Is Part of Your Financial Planning

This is the connection parents often miss.

Helping your teenager develop a career direction isn’t simply something nice you are doing for your child.

It may also be one of the most consequential pieces of your own retirement planning.

If your children become financially independent at 22, 23, or 24, you can help them because you want to.

Perhaps you help with graduate school.

Perhaps you contribute toward a wedding.

Perhaps you help with a first home.

Perhaps you take the entire family on vacation.

That kind of generosity feels wonderful because it is voluntary.

It is very different from being 67 years old, exhausted from work, and realizing that you cannot retire because your 29-year-old still cannot support himself.

That is what Tim and Janet were confronting.

Their problem wasn’t that they hadn’t saved enough.

Their problem was that their financial responsibilities had never ended.

The Goal Is Not a Perfect Teenager

Parents sometimes hear this message and panic.

“My 16-year-old has no idea what she wants to do!”

That’s normal.

Neither does your 17-year-old.

They don’t need to have their lives figured out.

But they should be moving toward adulthood.

They should be developing work habits.

They should be exploring careers.

They should understand that college is extraordinarily expensive and should have some idea why they are going.

They should be developing marketable skills.

They should increasingly be taking responsibility for their schedules, their commitments, their decisions, and eventually their finances.

The goal isn’t to produce a miniature 40-year-old.

The goal is trajectory.

At 15, your child should be somewhat more independent than at 13.

At 18, considerably more independent than at 15.

At 22, considerably more independent than at 18.

And somewhere along that journey, the financial umbilical cord should gradually disappear.

Tim and Janet’s Lesson

Tim and Janet are going to be fine.

Their children are not disasters. Both have strengths. Both can build good lives. And their parents have the financial resources to help them through this transition.

But Tim and Janet understood something in their 60s that they wished they had understood in their 40s and 50s.

Preparing children for financial independence is not something that begins after college.

It begins long before.

It begins when you encourage your teenager to work.

It begins when you discuss careers rather than simply colleges.

It begins when you make your child solve some of his own problems.

It begins when you allow her to experience reasonable consequences.

It begins when you talk openly about money.

It begins when you gradually shift from managing your child’s life to teaching your child how to manage his own.

Most parents would gladly sacrifice for their children.

Tim and Janet certainly would.

But the ultimate purpose of that sacrifice should be to help children reach the point where continued sacrifice is no longer necessary.

So, yes, fund your 401(k).

Save diligently.

Invest wisely.

Pay down debt.

Plan carefully for Social Security.

But if you are a parent of teenagers, add another item to your retirement plan:

Raise children who will eventually be able to support themselves.

Your future children will be grateful.

And your future retired self may be as well.