Along with decluttering your home of your children's sports gear and art projects, tackle some financial tasks to better organize your life and free up money for your own financial future.
Don't share the wealth
Thirty-nine percent of parents admit to paying for their adult children's cell phones, says a recent survey by CreditCards.com. Parents also foot the bill for their grown kids' gas, rent, student loans and other expenses. If your children are on their own and gainfully employed, it's time to let them pay their own way. These little expenditures, though small, can add up.
If you're still set on taking advantage of more favorable family pricing for your phones, consider setting up an automatic payment plan, so your children pay their share of the bill each month into your account.
Save like mad
Even though an empty nest often means more disposable income, many parents don't use their newfound wealth to shore up savings. Families only increase their 401(k) contributions by 0.3% to 0.7% on average after their children leave home, according to Boston College's Center for Retirement Research (CRR).
While it's natural to want to splurge after denying yourself for so long, remember that the years before retirement are a crucial time to play catch-up. Even a few years of aggressive savings can translate to a sizably bigger nest egg later on.
Get schooled on 529s
As a diligent parent, you might have funneled money for your child's college education into a 529 plan. While the plans have tax advantages, they also come with limitations. Earnings that aren't used for qualified education expenses are subject to taxes and penalties. So what can you do with these accounts if your child skipped college or scored scholarships?
Thankfully, there are a number of options.
- Save the money for your child's graduate or professional school.
- Transfer the account to another child for their educational expenses.
- Hold onto the account and use it to fund a grandchild's college expenses.
- Make yourself the account's beneficiary to further your own education.
- Use it for retirement savings. You'll have to pay taxes and penalties, but if your nest egg is slim, it could be a good source of funds.
Downsize your digs
With fewer people living under your roof, think seriously about downsizing your living situation. Housing is most people's biggest expense, according to data from the Bureau of Labor Statistics, so moving to a smaller — and cheaper — home could free up cash.
For example, downsizing from a home that's valued at $250,000 to one that costs $150,000 could save a homeowner $3,250 a year, thanks to reduced maintenance costs and taxes, reports Boston College's CRR. Investing the difference can yield even more and help increase your retirement savings.