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The “sandwich generation” is known as middle-aged individuals who have to balance the needs of their growing children while supporting their aging parents. They are given this term as they are essentially “sandwiched” between the obligation of having to take care of their elderly parents while ensuring that the financial, physical, and emotional needs of their children are met.
If you fall into this category, having to juggle the needs of both sides is no easy feat. It’s also highly likely that the recent coronavirus outbreak has further stretched your finances.
While it might seem overwhelming, it is possible to get your finances in order and take care of all three generations. Advanced planning is integral to making this work, and the following tips should help you get started.
No matter if still living with parents or not, one of the first things you should do is have an open and honest discussion with your parents. It’s always better to keep the lines of communication open and find out what retirement plans they have. Start off with a light-hearted topic before delving into deeper chats about whether or not they have a will, retirement funds, long-term care insurance, and other items in place.
Knowing your parents’ retirement income and expectations are essential to figuring out your future plans. Not only will it give you a headstart in planning, but it will also offset the chance of being blindsided when a parent becomes unable to care for themselves, especially when you want to provide them with the best possible care.
Speak with your kids
While it may not be the easiest conversation to have, kids play an important role in the allocation of finances. Setting clear expectations with them now will help with avoiding unpleasant talks in the future.
There’s a chance that your child may expect some help in paying off their first car, college, or even buying their first home. As a parent, you need to be clear about whether or not you’re able to help with paying for those expenses. The best way forward is to set boundaries now and be straightforward about the monetary expectations you have.
Saving is key
While saving can be especially hard when money is tight, it’s an essential piece for financial stability, especially retirement savings. The last thing you’d want is to end up being a burden to your children, or not have the money you need to take care of your parents. That’s why it is important to constantly review expenses and ensure you stick to plan and goals on track.
Recurring costs such as electrical bills, phone and subscriptions all can pile up. Additionally, check if there are wins to be had. Companies love to reward loyal customers through creative loyalty programs, savings plans and tools of ongoing use such as p-cards and various stimuli. Especially credit card management is something to keep a close eye on. Done well, you could get extras and loyalty perks for free, done wrongly it is unneeded costs and interest. While frivolous spending can put a dent in any saving effort, whether it is yours or the kids.
Speaking of your kids, think about opening a savings account for your children and, depending on how old they are, helping them or encouraging them to put (some of) their pocket money or income into that account each week. This will not only help them to have a little nest egg when they are older, it’s also a great way to teach them responsibility.
Invest your money
Even though placing your savings in a bank will help you earn a bit of interest, investing is a great way to make additional money during this process. If you’re just getting started, there are plenty of resources available online that will help with pointing you in the right direction.
One of the best investments you can do, however, is an active exchange-traded fund (ETF). They’re popular as they are a quick, easy, flexible, and inexpensive option in comparison to other investments. If you’re worried about the risk of investing, you’d be relieved to know that active ETFs are much less volatile than individual stocks, resulting in a lower risk of losing investments.
Check your spending
A spending plan is just as important as a savings plan. By crafting one, you’ll be able to have peace of mind knowing that your money is being spent in a financially responsible manner. It’s okay if your spending plan changes as the years go by. You have to revisit it and make necessary adjustments to ensure that you don’t veer off course.
Keep an eye on your income and budget. You may have to cut back on work so you can take care of your parents, which means you’ll be earning less. When you earn less, you can afford less so sit down, work out what you need to spend and what you can save money on.
Do you really need to be going out to dinner twice a week, or coffee dates with your mum? Don’t spend money you don’t have.
Set financial goals
Just because you’re on a budget, doesn’t mean you can’t set goals. Even if you aren’t working anymore because you’re caring for your parents, try to continue to make regular contributions to your company pension plan so you’re set up for the future. Keep an emergency savings account and add to it at least once a month.
Another thing to consider is how can you increase your income if you are no longer working full time? If you’ve been paying extra on your mortgage, consider lowering your payments for a while. If you have credit card debt, try to pay those cards off and then cut them up so you don’t have the temptation there to live beyond your means. Remember that your parents won’t be around forever, so even though your main focus might be on their welfare for now; you need to make sure you’re set up for when they are gone.
Help your parents prepare
Although it’s not a nice thing to discuss, now is the perfect time for you to talk to your parents to make sure their estate and finances stay in order. Check that they have their wills drawn and talk to them about the debt they may have – if something happens to them, reliable insurance or anything that will essentially become your debt. Work out a basic plan for their estate, including who gets what, who will be executor of the will and who is power of attorney. Discuss life insurance as well and find out if your parents have it, with who, and the details of their policy.
The more you know and understand about your parent’s wishes, the more manageable their estate will become. This also provides you and your parents with peace of mind, and allows them to live their days knowing that everything will be taken care of according to their wishes.
If you’re feeling overwhelmed with everything detailed above, it’s okay to feel that way. Being part of the sandwich generation has its difficulties, and it’s best to ask for help sooner than later. If you wait, it could result in dire consequences from not being able to care for your parents adequately to the depletion of your retirement savings. Learn from Millennial loans and remember that support is available and you don’t need to do it all alone. Talk to your GP, counselor, financial planner, or a family friend; anyone that can help make life less stressful.
To mitigate these issues, there’s nothing wrong with reaching out to a financial planner to help manage the needs of both your parents and kids while ensuring your own financial stability. Most importantly, you should remain calm and positive throughout this process, and be confident that you’ll be able to handle all of this in stride.