Earlier this year, my sister and I found ourselves unexpectedly becoming members of the “Sandwich Generation”—that is, adults who are caring for both children living at home and aging or elderly parents at the same time. Our sandwich moment arrived when our mother came down with acute pneumonia just days after Mom and I threw a baby shower for my 8 months pregnant sister, making my sister the poster child for the generation.
Thankfully, our mother will make a full, if slow, recovery. But my sister and I certainly have some different responsibilities to take on now that we are both raising children and helping to take care of our parents—although we’re lucky in that our parents don’t need the kind of daily care that some sandwichers have to provide. But both my sister and I have had to take on additional roles while Mom is in the hospital.
When caught between two generations of family who need your support, care, and potentially your income, it’s important to remember that you need to take good care of yourself, particularly when it comes to your finances. Here are some ways to stay on top of your finances while taking care of two generations:
1. Pay Yourself First
We all know that we should save for retirement ahead of our children’s college funds. However, saving for retirement ahead of Mom and Dad’s long-term care is a harder emotional decision to make—although it is an absolutely necessary one. Your parents’ own assets should be what you use for their care for as long as you can. Otherwise, you may end up passing along a legacy of sandwich generation money problems to your kids. Just as it is not selfish for a caregiver to take time for him/herself, it’s not selfish for you to continue to fund your retirement.
If you keep putting it off you may find yourself backed into a corner where it’s too late. Now you are forced to cover the expenses for your parents and the kids. Start putting money in your 401k at work, especially if your employer matches contributions. Or open the Roth IRA you keep telling yourself you should. Just do something!
2. Debt is the Silent Killer of Financial Dreams
Nothing kills financial goals faster than debt. The more of your monthly income you lock up in interest and principal payments, the less money you have each month for your daily living expenses, much less your savings, investments, long-term goals, and yes, even a little fun money. Stop looking at purchases as “How much the payment will be per month” and what the actual cost will be. If you can’t pay cash, don’t buy it…period.
3. Save For College Yesterday
If you can swing it, open a 529 College Savings plan or Coverdell ESA, and start investing with as little as $25 per month. Starting earlier will allow you to get jump start on funding their college education. But don’t go overboard. Your retirement should be your priority.
If you can’t afford to save for their college, have an honest talk with your kids. Don’t sell them dreams of Harvard when you can only afford the local community college or State University.
4. Invest in Insurance
Both for yourself and your parents, making sure that you have adequate insurance can mean the difference between financial security and a money disaster. Long-term care insurance for your parents can help to offset the elevated costs of end-of-life care, especially if your elderly family needs round-the-clock care. The best time to purchase this insurance is early—before Mom and Dad hit their 70s or get seriously ill.
For yourself, make sure you invest in disability insurance. According to the website disabilitycanhappen.org, 1 in 4 American workers will become disabled at some point during their working years. This could be devastating for a family with two generations counting on the disabled worker’s income.
5. Have the Tough Discussions
It’s important to know what your parents are facing financially before they need to count on you for care. Sit down with Mom and Dad and ask what they have saved and where it is. Find out whether they still have life insurance, what plans they have made for their twilight years, and who they trust as their financial advisor. Inquire about their retirement savings and find out if they have enough saved to take care of themselves. You will have some tough decisions to make if your parents don’t have enough saved for retirement.
It’s important to know all of these things in advance, so that you will be better able to make decisions should something happen. It’s also a good idea to keep an eye on Mom and Dad’s financial decisions, considering how often the elderly are targeted for scams.
In addition, the family—including your siblings—should make the decisions about who will have power of attorney and who will be the “point person” for regular caregiving. Discussing all of this ahead of time will help prevent stressful miscommunication and potential resentment during an emotional time.
Make sure they let you know the location of important documents such as: wills, trust documents, insurance policies, investment account statements, stock certificates, etc.
6. Become an Expert on Medicare and Social Security
Don’t forget that there are financial programs available to help out elderly Americans. Take the time to determine what your parents are eligible to receive. The websites www.benefits.gov and www.medicare.gov both offer questionnaires that will help you figure out what your parents may be entitled to and will direct you to those programs in order to get Mom and Dad signed up.
7. Consult an Expert
A financial advisor can help you to determine the best course of action for preserving your assets, ensuring your parents’ dignity as they grow older, and planning for your children’s future. Being in charge of day-to-day decisions for multiple generations is exhausting enough without adding the stress of financial decisions. Consult with an expert so that you do not feel as though the entire world is on your shoulders.
The Bottom Line
The Sandwich Generation has an unenviable task. But with open communication and planning, taking care of your parents and your children does not have to be an overwhelming prospect.
Photo credit: Martin LaBar