The financial decisions that come with an empty nest

For years, family life can shape almost every part of your finances.

There are groceries and activities, education costs and family vacations. Maybe you've also helped with tuition, a first car or other expenses as your children got started. At the same time, you've likely been balancing a mortgage, retirement savings and all the other costs that come with building a life and raising a family.

Then, gradually (or sometimes seemingly overnight) things change.

Your children grow up, begin supporting themselves and eventually leave home. While becoming an empty nester is often an emotional adjustment, it can also mark an important financial transition.

For some, expenses decline and there's suddenly more room in the monthly budget. For others, financial support for adult children continues well beyond the day they move out. Either way, this stage of life is a good opportunity to look at where you are today, what has changed and what you want your money to accomplish next.

Start by figuring out what has changed

An empty nest doesn't automatically mean an empty expense column.

Some household costs may decline, but others won't. You may still be helping your children with education, rent, a wedding or a down payment on their first home. Meanwhile, your own priorities may be changing too.

Before deciding what to do with any additional cash flow, take a fresh look at your finances.

How much are you spending today compared with a few years ago? Are you still carrying debt? Have your savings increased? How much are you contributing toward retirement? And are there new expenses on the horizon that weren't part of the picture when your children were younger?

Understanding your new circumstances can help you make intentional decisions about what comes next.

Give your retirement goals another look

For a lot of parents, the empty-nest years arrive at the same time retirement starts to feel much more real.

If you're in your 50s, for example, you may have spent decades saving for retirement while simultaneously supporting a family. With fewer day-to-day demands on your income, you may now have an opportunity to increase your retirement savings.

But simply putting away more isn't necessarily the goal.

This is a good time to revisit some bigger questions: When would you like to retire? What do you want retirement to look like? How much income might that lifestyle require? Are your current savings and investments putting you on the right path?

The answers can help determine whether additional cash flow is best directed toward an RRSP, TFSA, debt repayment or another priority.

Decide what role your mortgage plays

The family home can also look different once the family isn't filling it. You may find yourself wondering why you're maintaining rooms you rarely use. Or you may love your home and have no intention of leaving it.

There's no universal right answer.

If you're carrying a mortgage, additional cash flow could create an opportunity to pay it down more quickly. If you're mortgage-free, you may want to consider how the value of your home fits into your longer-term retirement and estate plans.

And if you're considering downsizing, it's worth looking beyond the sale price. Moving costs, real estate fees, taxes where applicable, condo fees, renovations and the cost of a new home can all affect how much downsizing actually frees up.

The financial question isn't just “Do we still need this much house?”

It's also “How does our home fit into the life we're planning next?”

Set some boundaries around helping adult children

Children becoming adults doesn't necessarily mean the financial support stops.

You may want to help with a down payment, contribute to a wedding, cover some graduate school costs or provide support while your child establishes their career. Being able to help can be very rewarding.

The important question is how much you can comfortably give without putting your own future at risk.

That can become particularly important as retirement approaches. Unlike your children, who may have decades of earning potential ahead of them, you have a more limited window to build the assets you'll eventually rely on for income.

Helping your children and protecting your own retirement don't have to be competing goals. A financial plan can help you understand what you can afford to contribute – and where it may make sense to set limits.

Revisit the plans you made years ago

A lot can change between raising young children and becoming an empty nester. That's why this can also be a useful time to review some of the financial and estate decisions you made earlier in life.

For example, do your current life insurance needs still reflect your circumstances? Are the beneficiaries on your insurance policies and registered accounts up to date? Do your will and powers of attorney still reflect your wishes? Have your priorities for your estate changed now that your children are adults?

These aren't necessarily things that need to change because the kids have moved out. But they’re worth reviewing to make sure your financial plan has kept up with your life.

Don't forget to enjoy some of the flexibility

One final thought: financial planning isn't only about preparing for someday. After years of directing a significant portion of your income toward raising a family, you may finally have more flexibility to spend on yourself.

Perhaps you'd like to travel more, take up a hobby, renovate your home or simply have more room in your budget to enjoy everyday life. Those goals deserve a place in your financial plan too. The key is finding a balance between enjoying what you've built today and preparing for the years ahead.

A new chapter deserves a fresh look at your plan

Becoming an empty nester can be the beginning of a period with more choices about how you use your time and money.

Those choices may include saving more for retirement, paying down debt, helping your children get established, making decisions about your home, or simply giving yourself permission to enjoy more of what you've worked for.

We can help you look at the full picture and understand how life's changes affect your financial plan. If your household has changed, it may be a good time to make sure your financial strategy has changed with it.

Let’s talk about what you want your next chapter to look like – and how your financial plan can help you get there.