It’s become every mother and father’s dream in the cycle of life: kids grow up to go to college, tuition gets paid, and then the kids graduate to go out on their own without relying on the parents. What happens? The familiar “empty nest” phenomenon.
That’s when parents suddenly get their finances back in order, so to speak. No more shouldering the expenses of the little ones, no more tuition payments, no more cell phone bills (at least for the kids), food expense also goes down, and car payments essentially end. The kids are now on their own.
And income belonging to the parents are now solely for those parents. It’s like paradise. The empty nest.
The Problem Is That Empty Nest Isn’t so Empty Anymore
Statistics show that about three in every ten Americans between the ages of 25 and 34 end up living back with their parents. Why? The sluggish job economy. Times get tough, but you can always fall back on your parents and their reliable income and home.
The result, though, of having the chicks back in the nest for that long is that parents in their “empty nest” (when the chicks finally leave, or leave again, to be out on their own) don’t have as much financial stability and savings as generations in the past used to.
It’s pretty sad when 40-50-somethings with kids already out of college have to take out a direct lending plan just to finance the mortgage they’re almost done with when that loan should be utilized for emergencies, or even helping out the young ones through a massive jam in their lives.
It’s a tumultuous change in the personal finance environment of many Americans, unfortunately – but it is a change you can roll with, as long as you take the necessary preparations:
Focus on Retirement
It’s a tough idea, but a good one. Typically, you’ll find that “indulgences” do increase when the chicks leave the nest. Instead of parents paying for textbooks and tap dancing lessons, they’re paying for personal vacations to the Bahamas or Las Vegas or going out to restaurants every night for dinner.
When you think about it, though, it’s pretty warranted! The parents have worked their tails off. Give them a rest, some reward, right?
But you still have to prepare. Put some of your income into retirement. Utilize your 401(k) and add some more dough into the pot to pad the money pit just in case. IRAs are helpful, too.
Downsize
It doesn’t sound so good; but in the long run, you may appreciate it so much more! Because the kids are out of the house, you won’t need the extra space at all. So downsize. Sell the house and move into a nifty apartment.
Sure, the memories and work on the house over the years end up in echoes of the past, but it’s a small price to pay for less space to move around in at your old age, plus a fun clubhouse to go to and no need to keep a yard or maintain utilities. Yes, there are some benefits to living in a smaller abode, or apartment.
Reconfigure Your Insurance Policy
This is actually quite easy not to think of, but you’ll find that you save a lot more money if you do: your life insurance policy.
Obviously, you don’t think about it because the prospect of dying isn’t something you’d think about! But here’s the deal:
With the kids out of the house, you’ll realize that they don’t need to be on your policy anymore. Reassess your living situation. It could mean less of a premium payment. That means more money saved. End of story.
Preparation Is Key
Life is unexpected. So be prepared. You never know when the young ones end up coming home wanting a place to stay! So the point is to always keep saving.
Why? Because you’ll need some money to spoil the grandkids, right?
All true. Our kids are grown, but we help them out with babysitting and helping with their projects. Fortunately so far none have needed to move back home. We are just trying to decide whether to downsize since the house is paid for. Rent would be a new expense that we don’t have to pay for now. And there are no guarantees that rent won’t go up. It just seems cheaper to stay put.