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Financial Tips for the ‘Sandwich Generation’

financial tips for multigenerational families
Financial Tips for Those Who Juggle Caring for Aging Parents While Raising Kids.

Are you in the position of feeling you need to juggle your own financial needs with both your children and your aging parents (or another relative)? If so, you are a part of the “sandwich generation”. You are not alone; twelve percent of all parents fall into this category.

It can be a taxing and stressful situation to be in, not just financially but also emotionally. Your kids may need help with college and large expenses like a car or home, and your parents may be depending on you for extra security as they move further into retirement, and possible medical issues arise. With these added economic expectations, how are you to save for your financial health and retirement?

These tips are different strategies designed to help you, the sandwich generation, navigate the difficulties of caring for your children and aging parents. The most important thing is to have a plan, and if you do not have one, this will get you started on the right foot.

Open Communication with Your Parents
If ‘the talk’ has not happened yet, it may be time to reverse roles and sit your parents down for a talk about finances. Finances can be a very uncomfortable subject for some, especially if there is not an established report of finances in the family. It is better to broach the topic sooner rather than later, so the doors of communication will be wide open.

It may take several talks about broader retirement plans before you discuss more of the specifics. It is okay to start in this general way until you can speak specifically about topics like long-term health care, power of attorney, and estate documents. In cases where a parent may be suffering from memory-loss or a terminal illness, it is good to approach these conversations more directly and with support. Being on the same page will help to ensure there are no surprises for either one of you.

Open Communication with Your Kids
It is never too early to begin teaching your kids good money habits. Once they are old enough, it can be beneficial to include them in some of your own financial decisions. Much like the discussion with your parents, this will open the doors of communication and ensure there will not be any surprises or unreasonable expectations.

If your kids are involved in your financial planning, they will be better prepared to begin their own financial trajectory with a good foundation. It will also help to establish boundaries as far as what you can provide for them. Certain expectations like a car, college tuition, or a dream wedding may not be realistic for your financial situation — and that is okay. If they know your limits, it will help both of you get a more realistic view of how to plan for the future. This knowledge may inspire your kids to seek out scholarships, grants for school, or loans for other large endeavors. Understanding the impact of debt and the ability to save is critical, and if learned early, they are better equipped to responsibly manage their debt and spending.

Savings, Savings, Savings
One of the best actions you can take for the financial health of you and your family is to begin saving as soon as possible. It is one of the most important steps in financial health and retirement planning, and yet one report found that only 44% of Americans had more than $5,000 in savings. Savings can be the bedrock on which you build your retirement. You do not want to be gambling on social security and your kids to provide for your retirement.

If your workplace offers retirement benefits or even has a matching 401(k) program instated, make sure you are contributing enough to maximize those benefits. Also, get in the habit of creating separate savings for different long-term and short-term goals as well as an emergency fund that can cover at least three months of household expenses.

Your Budget is Not Written in Stone
Having a budget is incredibly important for tracking expenses and knowing where your cash is going. It is also a good tool for looking at where and how you can spend your funds. Being a part of the sandwich generation, you will have pressures on your budget from both sides, this could be health expenses for your parents or paying school expenses for your kids. These are all fluctuating occurrences, and as such, your budget should be flexible to accommodate for them. As different expenses come to the front and others disappear, you will be able to see how much you can afford. Be prepared to go into your budget and switch things around as your expenses change. Making adjustments to your budget is another moment to involve your children in a learning opportunity.

Create a Net for Yourself, Create a Net for the Family
Life is unpredictable, and there is so much out of our control that we cannot foresee. Looking into different types of insurance can be a real lifesaver. It is important to note that when you put these protections in place, they are not just acting as a safety net for one person but multiple generations of the family.

Talk to your parents about health care costs and find out what their insurance coverage will be. Some services that may be necessary, for instance, nursing home care or home health aides, may not be an option with Medicare. If they invest in long-term care, it will not only be a boon for them but will release the potential financial burden from the rest of the family. 

Buying life insurance policies for yourself and your parents is another way to protect yourself financially. Check to see if your insurance policy has a rider allowing for an accelerated payout to help pay for long-term care. The life insurance policy can help with strengthening retirement funds as well as helping to support a child with college.

Emotions can be one of the hardest things to exclude from financial decisions. When financial decisions also include family members, it can be added pressure. Despite these hurdles, the best decisions are made without letting emotions interfere. Be sure to take a moment and let your strong emotions pass before committing to any financial obligations like college or caregiving. Simply taking the time to sleep on it can give you enough distance to make a numbers-based decision instead of an emotion-based one.  

Have Your Family Plan in Writing
Have all family members, who are going to be involved with financial planning, on the same page. Be sure to include siblings in your talks with your parents and consider creating a document outlining their plan. Be sure to have your plans backed up legally. Get the necessary documents in order — for instance, a will, power of attorney, and estate plans. You will also need a more detailed plan backing these things up legally. If a parent has Alzheimer’s, or another form of memory loss, make sure you know where these documents are stored just in case. Once all the paperwork is in order, you can focus on the emotional aspects of taking care of your parents.

Ask for Help
Being a part of the sandwich generation can make you feel stuck in the middle. In addition to your financial pressures, there is the added pressure of two generations of your family. This feeling of being overwhelmed can be too much and asking for help is the appropriate response.

Trying to do everything by yourself can lead to necessary things not getting accomplished. An unexpected medical emergency could create a situation where you are no longer able to get the appropriate paperwork in place. The stress can also lead you to make emotion-based decisions that could result in overextending yourself. Asking for help is always an option, and it is never too late.

Do not wait for the crisis to happen; get in contact with a trusted financial advisor who specializes in helping the “sandwich generation” before you have reached crisis mode. We have the experience to make impartial recommendations and create a plan that will serve to help you and your family maximize your financial potential and stay protected from unnecessary burdens.

Contact an Advisor at Paces Ferry Wealth Advisors for a complimentary Discovery Meeting.

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).  This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

Zachary Morris

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.