Financial Decisions for Your Children: Balancing Today’s Needs and Future Security
One month ago I was seated across from a client who was wrestling with a decision that might sound familiar: Should they use a portion of their investment portfolio to help their daughter with a down payment on her first home now, or keep those funds growing to achieve their retirement goal in a decade?
This is just one of countless decisions that our clients face when making financial choices that will affect their children. And while there are no universally correct answers, here’s what we’ve learned through decades of helping clients make more confident, informed decisions that work for them.
Identify potential tradeoffs
Every financial decision has tradeoffs. Consider how today’s choices may affect your future with these common scenarios:
Potential negative impact on your credit score and ability to qualify for future financing
Set equal education budgets for all of your children
Could limit opportunities for your children with different needs
When evaluating your own wealth management options, remember that no universal right answers exist, because money decisions – and the tradeoffs that come with them – are deeply personal.
Consider resource allocation
Your finite financial resources often require you to allocate them in ways that can both maximize your children’s future wellbeing while still maintaining your family’s financial health. This is a tricky balancing act that requires a thoughtful approach.
We’ve found that clients who first ask these questions gain clarity about resource allocation for their children:
Beyond its financial impact, how will this choice affect my familial relationships, life experiences, etc.?
How much flexibility do I need to maintain for unforeseen expenses or new opportunities?
Which of my options creates the most positive impact across my time horizon?
Which of my options am I least likely to regret in the future?
Maximize impact across your children’s financial timeline
Finding the right balance between enhancing your children’s experiences today and securing their financial future means weighing immediate needs and long-term impacts.
We work with clients to help them consider key principles to maximize positive outcomes throughout their development.
The opportunity cost of financial priorities: Dedicating significant resources to future education may mean less money for enriching experiences during your children’s formative years.
The compounding effect of early decisions: Wealth management choices made when your children are young (like funding a 529 plan) can have an outsized benefit over the long-term.
The value of flexibility: Giving yourself a financial buffer today can allow you to support them during life’s unforeseen events (i.e. job loss, home repairs, etc.) whenever they arise.
Ensure a judgement-free approach
Whether you’re working with a financial advisor, discussing options with your spouse, or reflecting on your own values, the goal isn’t to judge your life choices, but to create a safe space where all options are considered openly and honestly. This approach helps you clarify your options and their potential outcomes.
At Affinity Wealth Management, we create judgement-free financial strategies that honor your family’s values and dynamics. Our advisors can help you develop approaches that create a balance between today’s needs and future considerations when it comes to education funding, inheritance planning, or supporting children through different life stages.
For more family financial planning tips, follow us on LinkedIn or schedule a "Connect Meeting” with an Affinity Wealth Management financial advisor to discover how we can support your family’s needs.