How to Keep the Kids from Wrecking Your Retirement

Last Updated Jan 6, 2010 1:08 AM EST

A recent survey released by found that 40 percent of parents have bailed their adult kids out of debt somewhere along the line.

The bank of Mom and Dad reported helping out most often with the following debts:

  • Auto loans: 40%
  • Medical Debt: 37%
  • Credit Cards 30%
  • Utilities 31%
  • Student Loans 29%
  • Mortgage 11%
Let's knock Medical Debt out of the conversation. That's unexpected and unavoidable debt. (The fact that in 2007 medical debt played a role in 62 percent of bankruptcies is pretty much all you need to know about how broken our health care/health insurance system is.) But that still leaves Auto Loans and Credit Card debt rounding out the Top Three parental bailouts. Those are 100% self-inflicted debts. I'm also guessing that a fair portion of the mortgage help was not for helping kids who've lost jobs and need some temporary assistance, but rather because the kids took out absurd negative amortization loans. And plenty of the student loan aid no doubt went to help kids who naively waked into super-expensive private loans that grabbed a big chunk of the college loan market prior to the financial meltdown.
In many instances, parents are helping out even though they can't really afford to. They raid their emergency savings, or retirement accounts (or suspend contributions) to come up with the help. I am not going to suggest saying no to your kids. There's no arguing with the DNA pull of helping a child in need, no matter what their age.

But here's how you can really help: if your kids are still kids, educate them so they have the financial smarts that will keep them from screwing up on car loans and credit card debt later on. You avoid future bailouts that mess with your own financial security by making today's teens financially literate.

If you're not up for teaching the must-have basics before college: How Credit Cards Work, How Loans Work, the Power of Compound Growth, Budgeting 101 push your kid's school to start teaching some financial planning ABCs. Not economics. Personal finance. Economics: nice to know. Personal Finance: must have knowledge. If the school isn't sure how or where to start, suggest checking out the National High School Financial Planning program developed by the National Endowment for Financial Education.