education | savings strategies
4 Money-saving Strategies for Empty Nesters
By Kali Roberge
When you're busy building wealth and providing for your children, your financial priorities might seem obvious: save for college, save for retirement, save for family trips, and so on. But what should your money-saving strategies look like once the kids are financially independent and you're closer to realizing your long-term goals?
As you get used to the empty nest and reclaim some freedom in both your time and cash flow, you might feel a little uncertain about how to best utilize both of those resources. That's normal — everyone struggles with the paradox of choice. When there are many things you could do or spend your money on, choosing the right priorities actually becomes harder than it would have been with fewer options.
If you find yourself in this position now that your children are off building lives of their own, here are four strategies you can use to optimize your finances and transition into this new phase of life.
1. Change Your Savings Contributions to Reflect New Priorities
Any parent knows that kids are expensive, especially when considering their college costs. According to Sallie Mae and Ipsos, families typically spend an average of $26,226 per year on college, with family income and savings picking up 44% of that bill. However, that doesn't include spending money — which you may choose to provide to your kids while they're in school — or the bills you pay on their behalf.
Once you are no longer paying for your child’s education, it is a good time to start redirecting those funds into your own savings and investment accounts.
Try to properly fund your own nest egg so that you won't need the financial support of your children in the near (or distant) future.
2. Evaluate Your Monthly Budget
With kids out of the house, your normal monthly expenses might look a bit different, too. For example, you may see extra funds in your accounts because you no longer have to pay for your child's extracurricular activities — or perhaps you noticed a reduction in your grocery bill now that hungry teenagers no longer rampage through your kitchen. With this money freed up, you can devote more toward your interests and hobbies, or it could be routed into a certificate of deposit for safekeeping.
Each family's budget will look different, but the main point is to understand your monthly expenses will likely change once you become an "empty nester." Make sure you track your spending so you can understand where those changes show up. From there, you can make informed choices about how you'd like to redirect that money to other needs, savings goals or discretionary spending.
3. Review Unused Services and Subscriptions
Some expenses, like groceries or gas, will likely change on their own once your kids are out of the house. But there are other money-saving strategies you might want to leverage to further reduce your recurring costs in a smaller household. Here are a few common ones to consider:
- Update your cable or internet package. With your kids gone, you may be paying for television channels you don't watch or internet bandwidth you don't need. Consider calling your provider to ask about downgrading to lower-cost options, or switching to a different company entirely.
- Cancel annual subscriptions or memberships: Are there services, clubs, perks or amenities that you previously used as a family but no longer need? You may want to cancel these — or at least change to a different membership option — to reflect your household's new size.
- Change your coverages and plans: Depending on your family's situation, you may no longer want to keep your kids on your phone plan, health insurance, car insurance or other contracts. Make sure you evaluate all accounts where you currently pay for your children's access and decide if you'd like to pass it along to them to maintain.
- Drop unneeded insurance policies: If you had term life insurance policies to protect your kids from financial hardship, it might be time to consider dropping that coverage if they're out of the house and would not necessarily need your financial support. If your child is now 18 to 20 years old (or older), they might be able to get their own job and financially support themselves. Of course, this is an intensely personal decision and you may wish to keep an insurance policy that would pay out a benefit to your children should something happen to you — but it's at least worth considering and making a decision on, rather than automatically continuing to pay premiums when you might not need to.
Again, make sure you capture any space that you create in your budget by getting that money to work for you. If you have short- or mid-term goals, a high-yield savings account might be the best place to redirect the money you're no longer spending on your children's needs. If you want to accelerate your progress toward retirement, you might want to increase your monthly contributions, fund a taxable investment account or secure a bigger emergency fund that can provide additional runway.
4. Consider Other Viable Saving Strategies
In addition to reorganizing your finances once your kids move out, it's a good idea to see if your newly emptied "nest" can help you actively save in other ways. For instance, you may be able to convert a now-empty room of your home into a more functional space. Assembling a workout area can allow you to drop your gym membership, while an office space can provide you the venue to help launch the business you've always been interested in.
Or you could look to downsize. If you are an empty nester with a home in the suburbs you might want to consider selling it and renting or buying a condominium.
With an empty nest, you have a new opportunity to focus on your time and money. These are just a few ideas to help get you thinking about the possibilities. You've spent the last 18 years working hard — and saving money— for the benefit of your kids. Now, it's your time to focus on you and re-evaluate your financial priorities.