Sherry Finkel Murphy, CFP, RICP, ChFC
As a parent of adult children, there’s an ongoing tug of war between your values, your finances, and your time, with respect to your family.
True story: Last week, my husband hopped into his truck, and drove three states west on zero notice, to provide grandpa coverage for 5-year-old grandchild number four, while our daughter and son-in-law juggled careers, pregnancy, selling a house, and relocating. Their careers are taking them where they need to go; and we are monitoring where they land to see how we can best provide support.
We are feeling blessed to have the time and geographic flexibility that so many of our peers don’t have. It was a great case study in offering resources “besides” money, that are meaningful value-adds to the kids.
As your financial planner, I will always recommend that you “secure your own oxygen mask” (fund your own retirement) before you turn to the seat next to you and assist. That part certainly has not changed. What might be different for this generation is the notion of what “helping the kids” looks like. While once you were determined to fund a wedding or provide a down payment on a home, today you might be more creative—or even return to the intergenerational assistance of days gone by.
Here are some ideas for helping your kids that can be as rewarding for you as for your adult children:
Combine an opportunity to see the grandkids with a destination family vacation and pay your own way. Take the grandkids in the evenings or at certain hours to give your children a break without increasing the cost of their travel childcare. I have clients who love to travel separately and converge on a destination with their children and grandkids.
The grandparents split the cost of the rental with the adult children, for which the kids are grateful. Everyone gets a little rest. The adult children get a few much-needed date nights, and the grandkids have quality grandparent time.
Start 529s for your grandkids’ education. The beauty of grandparent tax-preferred 529s is that they’re not necessarily visible on the financial need form. But they may come with a state tax benefit for you. The gift of education, no matter where it’s applied, is never wasted. Plus, courtesy of the SECURE Act 2.0, long-open 529 accounts that go unused may be able to fund a Roth IRA for the beneficiary, instead.
If the goal is for you to downsize, maybe pay for a mother-in-law suite or a tiny house in your adult children’s backyard. I know many people want to help their adult children purchase a house.
This worries me a little, because the house may be too much of a stretch for the adult children’s cash flow (and may result in the loss of flexibility for relocation.) I know that for you, the parent, the American Dream was home ownership. But it may not be the first thing your kids should invest in. How about a creative compromise?
One client added funds to her daughter’s home-building budget to create a separate suite. Pre-pandemic, she summered in Europe, and everyone would visit her. Then she’d return home to her family for the winter, providing weekend babysitting coverage and an extra set of wheels for school and activity pick-ups.
Consider acquiring whole life insurance for your children and grandchildren, while they are young and insurable. Whole life insurance is a great utility player in a financial plan. It’s inexpensive to provide when young and the cash accumulation and/or long-term care rider can be critical to a retirement plan’s success. But your adult children, who have many competing obligations, may feel that it’s a bucket they can’t afford to fill until it’s too late and too expensive.
While you’re at it, acquire whole life insurance for yourselves and name your children as the beneficiaries.
Here’s what wealthy people know: They can spend or give away every dime of what they have, living later life to the fullest. It doesn’t matter if you have nothing left if you’ve already arranged for a tax-free transfer of wealth to the next generation via a life insurance death benefit.
Last, Ryan Frederick, author of “Right Place, Right Time,” is a longevity specialist who believes that geography—the right place to live—is critical to your health and wellbeing in retirement; and that living with or near family can be a multigenerational boon.
Be strategic about your own resources, your community, and your activity. Is ‘aging in place’ really the right solution for you? Does maintaining the family home worry your adult children? There’s a complementary body of research that indicates how important ‘grandparents’ are to the development of the youngest generation. Weekly wisdom and extra family time from Grandma and Grandpa (and help around the house) may be just what your adult children need, but something for which they would never think to ask. And there’s a great longevity benefit in it for you.
Of course, living near family requires setting boundaries and the rules of drop-ins. I am simply encouraging you to rule out nothing in your search for the perfect way to help your children, financially. As for me, I’m off to search for a small pied-a-terre exactly 20 minutes away from my kids’ new hometown on Zillow.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) and its subsidiaries, including Northwestern Long Term Care Insurance Company (NLTC) in Milwaukee, WI.