Follow these tips to bring financial security to a multigenerational household
If you find yourself juggling the task of raising children while simultaneously caring for your aging parents, then you’re a part of what is called the “sandwich generation.” While this can be a uniquely difficult position to be in, you’re not alone. In fact, twelve percent of all parents fall into this category.
It can be incredibly taxing – financially, emotionally, and mentally – to shoulder the responsibility of taking care of both your children and your parents, but there are things that you can do to make your journey an easier one. Here are five strategies to help you achieve and maintain financial security as a member of the sandwich generation:
- Communication Openly
One of the biggest stressors of being in the sandwich generation is feeling as if you’re expected to do it all for your kids and your parents without any help. However, holding all of that financial responsibility can be extraordinarily stressful, and practicing open communication can be a great relief for yourself and those you are caring for. Whether you are living with your parents or not, it’s important to know where they stand financially so that you can help them make the best decisions for their future and, ultimately, for yours as well.
This conversation has the potential to be tense, especially if you never talked openly about money growing up, but it’s necessary to get everything out in the open so that you can be prepared to assume financial responsibility should anything happen. Ask your parents about the nuances of their finances, how much they have saved, how much debt they have, what their expenses are, and whether they have any investments. You’ll also want to discuss if they should be receiving veteran’s benefits or Medicaid assistance and if they have any long-term care insurance.
No matter how uncomfortable, this conversation will ultimately be beneficial in bringing both your and your parents more peace of mind in knowing that everyone is on the same page. Knowing how much money your parents have, where it is, and what their future plans are will help you make better money decisions for them should the unexpected happen. Knowing their financial reality will also help you better protect them from making any big mistakes with investments or falling for scams they may encounter.
2. Utilize Special Savings Accounts
Even though money can be incredibly tight when caring for multiple generations, it’s important to prioritize savings. Contribute as much as you can manage to your personal retirement savings and, if at all possible, look into opening a 529 plan for your children’s future college expenses. However, when developing your savings strategy, it’s important to remember that your retirement savings should get priority ahead of putting money into any college savings fund. After all, there are a multitude of loans available to help your children through school, but you can’t take out a loan to help you pay for your retirement.
Additionally, look to see if your employer offers any employee benefits that you can take advantage of, such as a flexible spending account (FSA) that allows you to contribute up to $2,500 into an account that can be used to cover healthcare and dependent care costs. If both you and your spouse are employed and have this option, then it’s possible that you can both contribute a combined total of $5,000 to your collective accounts. These funds can then be used to cover medical costs for you, your children, and your elderly parents’ care needs, which could relieve you of a large portion of your financial burden.
Another great way to help cover the costs of your parents’ care without dipping into your own savings is to use their own assets for as long as they last. By doing so, you’ll be able to make the most of programs such as Medicaid, as well as allowing you better protection for your own future.
3. Maximize Your Tax Benefits
If you are declaring your parents as dependents on your taxes, there are a multitude of benefits that you can utilize to help cover the cost associated with caring for them. You have the potential to take deductions for their medical expenses, care expenses, and even medical home improvements if you have made any.
While not necessary, talking with a tax specialist can help ensure that you’re getting the most out of your taxes while also following the letter of the law.
4. Establish a Budget and Follow It
Though it can seem daunting and time-consuming, taking the time to write out a family budget can help you see how much money you’re bringing in, where it is going, and where it needs to be saved. Being in the sandwich generation often requires sacrifices, but establishing a budget can help you pick and choose where to prioritize your spending and saving.
Don’t be afraid to get the family involved in these budget discussions! For example, if you find you’re in need of some extra cash, throw a yard sale together and ask the whole family to chip in items to sell. You can use your situation to teach your children how to make and manage money as well. If you have children who are old enough to work, they could get a part-time job to help cover the cost of their cell phone bill or car payments. Your parents can also help, even if it’s just to contribute to the grocery budget. When you’re all involved in the discussions and decision-making together, it’s easier to come up with a plan that best suits your family’s unique situation.
SEE ALSO: Raising Financially Responsible Children
5. Don’t Forget to Ask for Help
Taking care of parents and children simultaneously can be emotionally, mentally, and financially exhausting. Don’t compound the stress by thinking that you have to make all of the decisions and do all of the things by yourself. Asking for help is not only encouraged, it’s necessary.
Have a serious talk with other members of your family to figure out ways that they can contribute. Even if it isn’t financially, having a sibling or child watch or care for an elderly parent at least a few hours each month can give you some much needed time to take care of yourself. Experienced friends who may be in similar positions or have experience with caring for aging parents might have great resources that they can direct you toward, as well.
It might also behoove you to sit down with a financial advisor who can help you navigate your challenges and make sense of your family’s financial position. They’ll be able to create a plan with you that prioritizes savings, maximizes your benefits, allows for your parents to make the most out of their twilight years, and can even point you to free resources that may be available.
At Andersen Wealth Management, helping you meet your financial needs is our first priority. If you’re interested in scheduling a discovery call, please reach out to us today!