How to Balance Retirement Plans and Parenting

Saving toward a prosperous retirement is an important objective. As a parent, you may have additional financial aspirations that are equally important, such as giving your children a fulfilling childhood and setting them up for a financially secure future.

At times it may seem like these goals are at war with one another—competing for your resources and causing you to make difficult choices. Do you plan for a comfortable retirement or university education for your children? Will you have to delay your dreams of early financial independence if you send your children to private schools?

Being a parent often introduces complex financial choices into your life. But the good news is that you don’t need to choose between retirement savings goals or spending on your children. It is possible to both save and invest for the retirement of your dreams while setting your children on a path for future success. You just need to find the right balance and a wealth management strategy that works for you.

Manage expenditures

When you handle many different expenses and investments at once, it can be easy to lose track of where all the money is going. Yet, if you can find ways to better manage your cash flow and monitor outgoing expenditures, those efforts could pay off in the long run. With a few meaningful spending cuts, you may be able to find extra cash to funnel toward retirement investments.

Here are some examples. You might consider setting a budget for your next family vacation instead of spending without a limit in mind. Or perhaps you could alter your next vacation from an expensive destination to somewhere more affordable. Other options could be to forego your membership at a country club you rarely visit or to resell season tickets you no longer use. Other expenses you could think about limiting include private lessons and personal trainers— essentially anything you’re willing to cut (even on a temporary basis) to free up additional cash flow for investing.

It can be tempting to think about how to make your savings grow first when you want to improve your retirement numbers. Yet you likely have more control over your cash outflow than your cash inflow. Therefore, it’s wise to take an honest, appraising look at your expenses and see if you can free up even a nominal sum to use toward your investment goals.

Invest for long-term prosperity, save for near-term goals

Once you set a limit on your cash outflow, it becomes easier to determine how much money you have available to save and invest. From there, it’s important to choose the best savings or investment vehicles based on individual financial goals.

Near-term goals

Saving for near-term goals allows you to maintain liquidity and ease of access. A savings deposit account could be a good option for storing funds for a family vacation, saving for a special event, or perhaps building up a down payment to purchase a new property for your growing family. You may also want to maintain some level of cash savings as an emergency fund.

Savings accounts can be a relatively safe place to store your money (when you use a Federal Deposit Insurance Corporation insured deposit account). However, the earning potential tends to be smaller. According to the FDIC, the average interest rate consumers received on their savings accounts in August 2022 was 0.13%.^[i]

Long-term prosperity

For goals such as retirement, lifelong prosperity, and generational wealth building, investing in a diversified portfolio of stocks and bonds tends to be the more rewarding long-term approach. The U.S. Securities and Exchange Commission (SEC) confirms that the stock market has historically provided annual returns of around 10% (6-7% when you account for inflation) over the long term.^[ii] Of course, there is always a measure of risk involved and there are no guarantees with any investment.

Deciding to invest is one part of the equation. You need to be sure to select the right investment strategy as well—especially if you hope to speed up the wealth accumulation process.

You may already be taking advantage of traditional investment methods such as 401(k) programs, IRAs, publicly listed stocks, and more. But, you may have questions about other investment strategies, such as becoming a qualified investor, taking advantage of primary access to IPOs, and more. It’s worth taking the time to research multiple options to ensure you choose the investment strategies that make the most sense for you. A financial advisor with Santander Investment Services can provide guidance as you plan your investment strategy.

Have a financial plan

The best way to forecast your future financial state is to build a plan that reflects your financial priorities. In other words, you need a personal financial plan.

You might already be familiar with the concept of a financial model in your professional life, especially if you’re a business owner. As an individual, there can be benefits to creating a financial model to help make decisions about your personal finances as well.

What’s your confidence zone? Analyze your current retirement strategy and put it to test to determine its probability of success against your personalized goals. Creating a financial plan can help you determine if your current savings plan will be enough to help you check off the items on your financial priority list or whether you may need to make adjustments.

Teach older children to become prosperous on their own

One final piece of advice you may want to consider when it comes to balancing retirement and kids is the importance of teaching older children how to prosper on their own. A recent survey found that in the United States, at least half of parents still provide financial support to their adult children. Furthermore, parents who do provide financial support to their adult children provide an average of $1,000 per month.^[iii]

When you take the time to pass down important financial principles to your children, it can benefit both them and you. Remember to share what you learn not just about saving and spending, but also about growing money with sound investing as well. As you show your children how you balance the important financial responsibilities in your own life, it can empower them with the knowledge and skills to do the same one day.

Talk to a financial planner or advisor

Find out how close you are to achieving your retirement goals. With a customized financial plan, you’ll have a personalized strategy for your investment goals and needs. It’s normal to have questions when it comes to your financial plan, even as an experienced investor. No one has all the answers, and you don’t need to figure out everything on your own. If you’re unsure about your investment strategy, how to create a personal financial plan, or anything else, you may benefit from talking to a financial planner or advisor.

As a Santander Private Client, you have access to a dedicated relationship banker and an on-demand team of financial specialists. They are available to help you create a personalized financial plan and help with your wealth management needs.