Reference no: EM131366934

Wanting to give children everything is a right of passage for parents, an urge that may never go away. From the new toy to the fancy car, showering children and grandchildren with gifts is something that financial advisor Celia Brugge sees often. For one set of clients, those who have become grandparents, it's unclear if they will have enough saved for retirement. And, yet, with the little grandkids around, the clients continue to want to spend on them. "You can have very smart, motivated clients that know exactly what they need to do," Brugge says. But when kids become part of the equation, "some of that intellect goes out the window." Of course, the grandparents' situation isn't unique. According to the most recent data analyzed by the U.S. Department of Agriculture, parents will spend $245,000 on their children by the time junior turns 18. But straight dollars and cents isn't the only way that growing tikes sap resources. Nor are they the only family members that cut into one's financial strength. Families have a way of mixing and matching financials, leaving everyone hurting when one makes a mistake. Know how much use the credit card gets. It's not unusual to share a credit card with a spouse or partner. According to CreditCards.com, 48 percent of credit card users do so. But it's unusual to look at what the spouse or partner spends on the card, with only 20 percent viewing what other authorized users spent on the account. This leaves many unaware of the family's total spending impact. While it's more unusual to allow a child to have access to a card – only 5 percent of empower children with a card linked to the parents' account – the impact can be dramatic if the child overspends. Brugge, an advisor at Dogwood Financial Planning in Memphis, Tennessee, says she only allowed her children to use a debit card while they were young, since it's easier to control how much they spend that way. But it's also important to set parameters around the use of the card, whether it's debit or credit. "If a child is accustomed to receiving almost anything they want, there will be little need to be prudent and conserve," says Leonard Wright, a member of American Institute of CPA's consumer financial educations advocates group. If choosing a joint credit card remains the best option for the family, ensure alerts and warnings are set up to notify you when to pay for the card, and if high spending occurs without your knowledge. With children come unexpected costs. With children, unexpected expenses arise. Even small expenses can become exponential, depending on the number of kids in the brood. Wright points to advanced classes, as an example. A high school student may take five advanced classes, which can lead to spending on a variety of different supplies needed in order to excel. Even if you just buy prep books, times that cost by five and it's a headache of an expense. "It is easy to injure financial security because of normal demands put on the family with good intentions," Wright says. Having a budget in place is a good start to ensure that the children's demands are met. It also protects the parents' savings. Based on the budget, set aside whatever amount is available for retirement savings. Automatically deduct that amount from paychecks into the retirement account. This keeps the retirement plan safe from these unexpected situations. Set aside time to avoid overspending. It's not uncommon in a family for one member to take on the role of overseeing the finances. That doesn't mean that the other spouse or partner should remain in the dark about the financial situation within the home. The more both partners know the financial story, the less likely one will overspend. To ensure both family members remain knowledgeable of the financial situation at home, Brugge suggests that the two partners sit down once a month to discuss the family's balance sheet. The financial date sets aside 15 to 20 minutes every month to discuss what's pressing when it comes to the finances. Early in the relationship, it might discuss budgeting. Then as one ages the priorities may change to buying a home or retirement planning. But both partners should be a part of these discussions, in order to make sure they remain on the same page. "Even if they're just being involved because the other person thinks it's important, make the effort," Brugge says. Elder care can drag down a child. With the baby boomer age group hitting retirement, more Americans have found themselves caring for an elderly parent. Nearly one-in-four say they have a parent above 65 that needs care, and 79 percent of those above 65 that need help receive it from a family member, according to Pew Research. "Dealing with long-term care can sink finances in short order," Brugge says. This can also leave a family's finances in disarray, if it falls upon the child to pay for everything. But instead of taking it upon themselves, Brugge advises the children of an elderly parent to seek strategic advice. She arranges for them to meet with a number of experts, including a geriatric care manager or an elder law attorney, depending on the person's needs. They can find resources that the parent can utilize to ensure security, without it all falling on the child. "Most elderly folks who still have their faculties still want to be independent as much as possible," she says. And finding the right help allows them to, without leaving the child's finances upended.