Emily Guy Birken* says handling finances while two different generations of your family are relying on you need not feel like an impossible balancing act.
Photo: Jovan Mandic
For those who are caring for their ageing parents and raising kids at the same time, it can often seem like there’s never enough time, money, or energy to provide for all the family members who need you.
In particular, handling finances when two different generations are relying on you can feel like an impossible balancing act — not to mention an exercise in feeling guilty no matter what you do.
But being the caregiver sandwiched between two generations makes it even more important for you to prioritise your own financial needs, especially when it comes to retirement planning.
By protecting your retirement during this difficult season of your life, you’ll be in a better place to remain independent as you age, launch your kids into a more secure adulthood, and offer ongoing support to your parents.
Sound impossible? It’s not.
Here’s how you can protect your retirement if you’re a member of the sandwich generation.
Retirement savings come first
Retirement savings should get priority ahead of putting money into your kids’ university funds.
Your kids can take on loans for university, but there are no loans available to pay for your retirement.
The more difficult decision is prioritising retirement savings ahead of paying for long-term care for your parents.
That can feel like a heartless choice, but it is a necessary one to keep from passing money problems from one generation to the next.
Forgoing your retirement savings during your forties and fifties means you’ll miss out on long-term growth and the benefits of compound interest.
By making sure that you continue to set aside money for retirement, you can make sure your kids won’t feel financially squeezed as you get older.
Instead of personally bankrolling your parents’ care, use their assets for as long as they last.
Communication is key
Part of the stress of being in the sandwich generation is feeling like the financial burdens of two generations (as well as your own) are resting entirely on your shoulders.
You feel like you’ll be letting down the vulnerable people you love if you can’t do it all.
But the truth is that you can’t do it all.
So, communicating with your loved ones about what they can expect can help you draw important boundaries around what you’re able to offer.
The conversation is a little tougher with your parents, in part because you need to ask them about nitty-gritty details about their finances.
Whether or not money is a taboo subject in your family, it can be tough for your parents to let you in on important financial conversations.
Being in the loop on what your parents have saved, where it is, what plans they have for the future, and who they trust as their financial adviser, will help protect their money and yours.
You’ll be better able to make decisions for them in case of an emergency, and being included in financial decisions means you can help protect them from scams.
Insurance is a necessity
Having adequate disability insurance in place is an important fail-safe for any worker, but it’s especially important for those who are caring for ageing parents and young children.
With parents and children counting on your income, even a short-term disability could spell disaster, and force you to dip into your retirement savings to keep things going.
Life insurance is another area where you don’t want to skimp.
With two generations counting on you, it’s important to have enough life insurance to make sure your family will be okay if something happens to you.
This is true even if you’re a full-time unpaid caregiver for either your parents or your children, since your family will need to pay for the care you provide even if they aren’t counting on your income.
It’s also a good idea to talk to your parents about life insurance for them, if they’re able to qualify.
For ageing parents who know they will draw down their assets for long-term care, a life insurance policy can be a savvy way to ensure they leave some kind of inheritance.
If your parents are anxious about their ability to leave an inheritance, a life insurance policy can help to relieve that money stress and potentially make it emotionally easier for them to draw down their own assets.
Become a social security and Medicare expert
Spending time reading up on the Aged Pension, Medicare, and other programs can help you to make better financial decisions for your parents and yourself.
There are a number of misconceptions, myths, and misunderstandings masquerading as facts about these programs, and knowing exactly what your parents (and eventually you) will be entitled to can help make sure you don’t leave money on the table or make decisions based on bad information.
Don’t be afraid to ask for help
Caring for children and parents at the same time is exhausting.
Don’t compound the problem by thinking you have to make financial decisions all by yourself.
Consider interviewing and hiring a financial adviser to help you make sense of the tough choices.
He or she can help you figure out the best way to preserve your assets, help your parents enjoy their twilight years with dignity, and plan for your children’s future.
Even if a traditional financial adviser isn’t in the cards for you, don’t forget that you can ask for help among your extended family and network of friends.
There’s no need to pretend that juggling it all is easy.
Family can potentially offer financial or caregiving support.
Knowledgeable friends can steer you toward the best resources to help you make decisions.
Relying on your network means you’re less likely to burn out and make disordered financial decisions.
* Emily Guy Birken is a former educator and the author of three personal finance books. She tweets at @EmilyGuyBirken.
This article first appeared at www.wisebread.com.
