Alexandra Cain Finance Writer
The day your last child leaves home may be a little sad, but it’s also a time of opportunity. It’s a chance for parents to reconsider their future, which often involves a re-organisation of the family finances. Let’s take a look at some of the steps you can take to build wealth once the children have become more independent.
1. Cut your expenses
It’s more than likely that you will have more money in your pocket when the kids leave home, as you will no longer need to buy groceries for them, and there will be fewer people using the hot water and borrowing the car.
This can translate into substantially more money in the household coffers, which can be used to build wealth.
2. Increase your savings
Given you’ll have more money in your pocket, now’s the time to really drive your savings. If you have a mortgage and you haven’t paid it off, now’s the time to make additional repayments, if you can, to reduce your mortgage and own your home sooner.
If you’re already mortgage-free, it might be time to top up your super account, to help ensure you have the most comfortable retirement possible.
3. Think about downsizing
Once the kids have left home it can be a good time to consider moving to a smaller property, or even a different area. If you own your own home, this can release capital you can use to build your investment portfolio. If you’re renting, this can help reduce your living expenses.
Your home isn’t the only thing you can downsize. You might also want to explore a smaller, more fuel-efficient car, to reduce your transport costs at the same time.
4. Plan for the future
Once the kids have left home for the last time, it’s an opportunity to take stock and develop a new financial plan that takes into consideration the family’s new child-free circumstances.
Now’s the time to refresh your financial goals and investment strategies to account for the extra funds the family will have at its disposal. It’s more than possible that the family’s circumstances will change in other ways in the near future. For instance, one or both parents may decide to retire, or be planning for retirement down the track. These factors need to be built into the financial plan to ensure the family is in the best position possible from a wealth perspective down the track.
5. Do something for yourself
While it’s prudent to put a bit more away for the future when your last child leaves home, don’t forget now’s the time to prioritise some of the things that may have taken a back seat while you were raising your family.
So put some money aside for treats like holidays, or to learn a new skill. This will help you start the next phase of your life on a positive note and assist you to build a new lifestyle during a time in your life where you have fewer responsibilities and more time for yourself.
Alexandra Cain is a finance journalist who contributes regularly to The Australian Financial Review, The Sydney Morning Herald and The Age.