Early Retirement with Kids

Typically in retirement planning one of the common assumptions is that the kids are out of the house and off the payroll when you retire.  Early retirement has no such guarantee.  For example, I know if I manage my goal of retiring at 45 I will have a couple of teenagers still around the house for a few more years.  So how do you plan for kids in early retirement?

In general I have yet to be too worried about this problem until I get closer to the end of my working life.  I haven’t had teenagers before, but after talking to other people I realize they can be a money pit if you let them be one.    So I won’t know there total drain on the household spending until I get closer to my target date.  In the mean time I’m planning on a few things:

  1. Control expectations.  I fully intend to make sure my kids know I won’t be giving them money for every little thing that want in life.  There will be limits and I intend to make it know for many years.  So the deal will be I’m prepared to spend $X per year on you via allowance and slush fund for activities.  If you burn through it in six months that isn’t my problem.  (This isn’t to say I won’t negotiate for unusual items.  I’m not so cold that I won’t at least listen to a proposal where they can’t afford something and they really want it.  I will be expecting some effort on their part to make it happen.)
  2. Fund RESP’s.  We already have RESP’s for the kids and I intend to ensure they are well funded prior to me going into early retirement.  I will only pay for one degree and each class only once.  If the kids fail something, they need to find a way to pay to repeat the class.
  3. Keep a kid slush fund.  I will keep a fund of cash to help cover all sorts of requests for help for the first few years when they leave the house.  I fully recall I needed a hand once and a while myself.  I haven’t decided exactly how much to put in for each kid, but I’m initially thinking $10,000 each.
  4. Teach them we are not rich.  An important item that I will have to teach the kids is just because I don’t work full time doesn’t mean I’m rich.  It’s almost insane the ideas people get when they think you have lots of money for some reason or another.  So the idea will be to teach them I worked hard in my early life, so I don’t have to work so hard now.  All it takes is planning.

So that’s my rough outline of what I’m planning on doing with my kids.  What would you do if you retired with kids?  Or if you have already been in this situation, what worked for you?

3 thoughts on “Early Retirement with Kids”

  1. Isn’t the risk not when they’re home and you can tell them to get jobs at the local bar/supermarket, but when they leave? In other words if one kid moves to Newfoundland and one to Singapore and you’re the one with the freedom to travel and presumably want to maintain relationships with your grandchildren, are you covered for that?

    My husband’s siblings live in California, NYC, England, Germany and Dhaka. We’re in Toronto. It does cost the family a collective fortune (well worth it of course) to stay connected!

  2. My parents helped out a bit with my education (tuition only). I had to pay for books, lodgings, and food (and partying) myself. I managed to squeeze by while holding down a part-time job and taking one extra year to complete my degree… loan free. I consider that achievement almost as significant as getting the degree. I’m sure that the kids of Canadian Dream will be well equipped to make sound financial choices when it’s time to fly the coop.

  3. Guinness416,

    Very good point. Travel can be a killer to keep in touch with family. Trying to predict that is very hard to do, so I guess your option is planning for a healthy travel budget each year in early retirement plan.

    I personally don’t have much of a travel budget myself, but if it becomes significant I could also work a bit to fund some extra trips. Or if it becomes apparent close to retirement that the kids are likely to be living elsewhere I can always work a bit longer to bank up some more.

    Cash Canuck,

    That is significant, good job. I didn’t even finish my degree debt free. I would encourage my kids to do if possible, but it will be there choice.


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