A new report reveals that many parents, in their effort to provide the best for their children, are jeopardizing their own retirement savings.
The Ameriprise Financial “Parents and Finances” report, released Thursday, surveyed over 3,000 American parents. These parents, with at least one child aged newborn to 30, have an average of $500,000 in investable assets. The study highlights that the biggest financial stress for parents is their desire to give their children the best possible life.
According to the report, 72% of parents feel guilty about their financial choices, and 35% put pressure on themselves to be “perfect” parents. This often leads to overspending on their children, whether it’s buying treats, presents, or exceeding their budget to make their children happy.
The College Dilemma
In the U.S., saving for college is a major source of stress. Rising tuition fees and the financial strain of student loans are concerns for many families. The survey found that 90% of parents plan to contribute to their children’s college education. Of those, 50% start saving before their child turns five, and 10% begin even earlier, before their child is born.
However, saving for college often comes at the cost of setting aside money for parents’ own retirement. With limited financial resources, families are being forced to prioritize. Deana Healy, vice president of financial planning at Ameriprise, advises parents to clearly define their financial goals. “What does your family value?” she asks.
She points out that while kids can take out loans and apply for grants for college, there’s no loan for retirement. “This is a case of putting your own oxygen mask on first,” Healy says. Ensuring your retirement is on track ultimately helps parents support their children’s future, including paying for college.
Lowering Financial Stress Through Communication
Healy suggests that parents can reduce financial stress by having open discussions with their children about money at different stages of their lives. For young children, this might mean teaching them how to handle small amounts of money, like the $5 from the tooth fairy. As children get older, especially in high school, it’s important to talk about the realities of paying for college, including whether they might need a part-time job or take out student loans.
“As children enter their 20s and approach major life events like weddings, parents should continue these conversations,” Healy advises. “Is it better to help with a wedding or contribute to a home down payment?”
By opening up discussions about finances, parents lay the groundwork for their children’s financial literacy. Healy recommends parents help their children by setting up a savings account, encouraging short-term savings goals, and involving them in family financial decisions. This approach instills good financial habits and values in children.
