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The most effective way to preserve the funds in your retirement accounts

Financial experts say that parents who make loans to adult children are making emotional investments that can deplete retirement funds. Educating children early about money can help keep parents' long-term retirement savings intact. Although it may be hard to turn your children down when they ask for money, it can help ensure your estate plan and retirement plans are financially supported.

Discussing finances early and often with children gives them a good basis for adult budgeting and money planning. Parents who avoid talking with children about how to handle money, the importance of saving, and the possibility of credit card debt are more likely to produce money-dependent adults.

Generous parents, willing to tap every resource to help financially-strapped adult children invest in start-up businesses or purchase new homes, may be hurting their own financial future, since money given to children is rarely repaid. Parents are urged to invest in children's deep-pocket ventures only with money they aren't expecting to be returned.

While young adults often run into walls of unemployment or come up short on cash to pay bills, parents who do too much to save them from learning hard money lessons are damaging their own financial security. Financial consultants agree that funding adult children only for short-term emergencies, motivating them to fix their own money messes and setting personal support boundaries can help preserve fragile retirement savings.

Parents who feel guilty for not giving children more financial backing need to realize that conservative family lending practices now will create a more comfortable retirement later and avoid a future money rut that may limit resources for expenses like long-term health care. Encouraging children's financial independence prevents a money drain that could easily turn retired parents into dependents themselves.

Source: US Money, "5 Ways to Safeguard Your Nest Egg From Your Children," Neal Frankle, 22 April 2011

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