ADVERTORIAL – How to help balance your retirement needs with financial support for two generations – your adult children and grandchildren.
With the cost of living as high as it is, many grandparents are feeling squeezed between the desire to help their children and grandchildren financially and the need to cover their own daily costs and save for their future, a new poll suggests. Fortunately, there are ways to avoid getting caught in the middle of multi-generational financial burdens.
According to a recent RBC poll, 1 in 5 grandparents aged 55+ are currently supporting at least one adult child aged 25+. More than half of these are sending money on a monthly basis.
An even more significant trend uncovered by the poll: this financial help is becoming more and more of a necessity rather than an occasional show of generosity. More than half (58%) of the grandparents who responded that they are supporting an adult child said this money is helping to pay for everyday expenses such as clothing and food. And we haven’t even mentioned grandchildren, who are also receiving help for everyday costs (30%).
Many of these grandparents are already feeling the pinch. More than half (54%) who are supporting an adult child and/or have gifted money to their grandchildren have already dipped into their own savings and one third (33%) are worried about running out of money to maintain this support and cover their own costs. There are, however, a few tips that can help grandparents avoid getting squeezed from multiple directions.
Have a frank conversation
Talk openly with your adult children about money, as early and as often as you can. It’s an opportunity to help them understand your own financial situation and to manage expectations. That way you help ensure that you won’t be called upon to offer more support than you can reasonably afford.
You may have heard estimates that it can take a million dollars in savings and investments to retire comfortably. In reality, that’s a myth. Due to a number of factors, the amount of money to fund retirement will be different for every retiree. And with increasing lifespans, that money may have to last for a very long time.
Build the financial assistance you’re providing into your financial planning
Make sure your own financial plan includes the money that you can afford to send to your children and grandchildren. And stick to it!
Even if your financial support is only occasional, it’s always a good idea to make sure you’re ready for an emergency. Every financial plan should have a rainy-day fund – perhaps yours should also include some extra cash for someone else’s rainy day.
A financial advisor can help you revise your plan, or build one from scratch.
Keep your eye on the future
As you get closer to retirement, it becomes more important to understand how your financial support to younger family members may be affecting your own plans for the future. Your savings are your lifeline, so make sure you will be able to cover your projected costs, as well as your cash flow needs today.
Retirement can last 30 years or more and has three very distinct phases: the early years; settling in; aging and the later years. Income and expenses will not be the same in each phase: you may be able to replenish your savings with part-time work during the first phase, but as time goes by that will become much harder and medical expenses will likely increase.
A few tips to increase your savings
In addition to all this, here are a few simple tips to help reduce your expenses or increase your income during your retirement:
- Review your subscriptions (TV, video streaming, internet, hard copy/online newspapers and magazines, etc.)
- Shop around for service providers (utilities, landline/mobile phone, etc.)
- Consider taking on a part-time job.
- Explore your investing options.
For more financial advice, go to RBC’s My Money Matters.
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Disclaimers
RBC Financial Planning is a business name used by Royal Mutual Funds Inc. (RMFI). Financial planning services and investment advice are provided by RMFI. RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. The information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
