IS your long-term retirement funding plan dependent on someone other than yourself? If so, may I politely suggest you keep reading? If you’re a parent of adult children, let me ask you an easy question. (And if you aren’t yet a seasoned father or mother, humour me and exercise your imagination; this a revealing exercise.)
When your new born baby first gazed up at you, and you locked eyes with that squirmy, precious bundle of life, did you think to yourself: “I can’t wait for you to grow up, make money and take care of me financially.”?
Of course not. Your mind was filled with how you wanted to keep this child safe and to prove your love to him or her throughout your life. I asked you the question, though, to alert you to a disturbing truth that pervades our culture: Some ageing parents of adult children harbour an excessive expectation of entitlement.
These older parents waltz through life without sufficiently planning for their own seasons of retirement. Instead, they implicitly believe their children are “honour bound” to wholly, fully and endlessly support them in retirement; to fully pay for their medical bills; and in some extreme cases, even wholly settle their external financial debts!
Don’t get me wrong, I believe our ingrained Asian cultural trait of filial piety is superior to the cut-and-release family dynamic we observe in Western nations.
I actively teach my younger clients in our consultation sessions to tangibly exhibit their love and respect to their parents and even grandparents by giving them monthly allowances.
DRAWING THE LINE
However, a line must be drawn in the sand. You see, despite all the amenities we enjoy in the 21st century, economic life is still hard for most of us.
Certainly in Malaysia, a confluence of negative domestic factors — including government policies that reject meritocracy in favour of communal objectives; that relegate and asininely minimise the role of English, the global lingua franca, in our public education system; and that tolerate the resurgence of corrupt practices throughout our nation — all contribute to our global ranking as a mere middle income, perennially developing nation.
So, the fruits of positive practices enjoyed more or less equitably by most citizens of most developed nations elude most Malaysians! Most notably, our monthly incomes are not high by international standards.
If the average aggregate income of a Malaysian B40 household is about RM3,500 and of an M40 household is about RM7,000 (and if I make the simplifying statistical assumption that those two economic strata have mean incomes that equal their median incomes), then those numbers translate to annual incomes of between RM42,000 and RM84,000 or roughly USD10,000 and USD20,000 a year for the two-fifths of our entire population that reside in the upper half of the B40 and the lower half of the M40 bands.
Anyone who has travelled abroad even to a modest degree, prior to some current Covid-19 border lockdowns, knows that living on, say, USD15,000 a year in 2020 is not sitting in the lap of luxury.
Parents have a primary duty to care for, nurture and raise their own children. But when grandparents expect their adult children to excessively support them financially, this causes financial stress and distress to their beloved grown children and unwittingly slashes the funds available for that middle generation to spend on their young children.
American author and financial coach Chris Hogan writes in his book Retire Inspired about an encounter with an older couple who in a meeting said they had taken care of their children when they were growing up and so now it was their children’s turn to take care of them. On the surface that statement is less shocking to Asians than it is to Westerners.
Hogan then writes: “In the same conversation, they talked about how much they adored their grandchildren. They never considered how this ‘now it’s their turn’ attitude might dramatically impact the lives of those grandkids.”
In quoting Hogan, I’m not saying grown children should not give money regularly to their ageing parents. I believe they should. I actively teach young adults just starting out in their careers to give money each month to each parent, separately, as tangible gifts of love and appreciation because it’s good character development.
PLAN WISELY
However, there should be sensible limits determined by a practical, personal budget. The economic pressures felt by filial adult children in our country to spend too much on their parents, while ensuring their own young children are fed and educated well often lead to knock-on borrowing because it is so hard for so many of us to get by solely on what we earn.
But as loan upon loan is piled on, the economic future of the two younger generations is placed in more and more jeopardy. It is regularly shown in Bank Negara Malaysia’s published statistics that Malaysian households have a per capita debt-to-GDP ratio that tops our region. This isn’t a head-of-table national ranking to covet.
It’s important for all of us to recognise that becoming an economic burden on our children late in our lives (tomorrow) when we have the chance and choice to plan to fund our own retirements (today) is unwise, unfair and, ultimately, unloving.
© 2020 Rajen Devadason
Rajen Devadason, CFP, is a Licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com You may follow him on Twitter @RajenDevadason.