Making finances work for the sandwich generation
Tuesday, 9 October 2018
It's tough enough to raise kids—for all the joy of being a parent.There are also heaping piles of logistics, expenses and exhaustion to navigate
Add in an aging parent or two who needs your help, and that ratchets the pressure up another notch. According to the Pew Foundation, nearly half of Americans have both children and at least one parent, and about 15 percent of them help their parents financially or by providing a place for them to live—or both.
It's tough to figure out how to balance everyone's needs. Do you keep socking away money for your own retirement? Do you put it toward the kids' college? Or do you use it to help pay for your parents' assisted living? Which takes priority?
BBVA Senior Financial Planner Jennifer Williams has some points to consider —and they all begin with communication.
Talk about your financial situation
Williams says a series of conversations is in order to understand everyone's financial situation. It's also important to realize that what works for your neighbor's family might not work for yours.
“It depends on the cash flow of the household. Some are lucky enough where they can still fund whatever they want to fund for college and help the parents out. Some, there might be a toss-up," she said.
The conversations should cover:
- Financial and medical powers of attorney.
- Estate plan, wills and trusts.
- Health, home, car, disability, long-term care and other insurance. How would they change if you consolidated households?
- What happens when one or both parents' health declines? What happens if there were suddenly a drop in household income? Liabilities and assets. Cash flow and income.
Williams suggests creating a family savings/spending strategy that includes everyone— even siblings who might not be directly involved, and kids who are still unable to contribute financially.
“Let the children in on the family finances to know what's going on and explain what you can afford for college," Williams said. “Encourage them to get as many college credit courses as they can in high school."
Saving where you can
When you add parents to the mix, you'll likely need to do some rebalancing. So maybe that means trading private school for public school, or you need to buy a less expensive health insurance plan, or that your parents don't get all the amenities at the assisted living facility.
If consolidating households is in the program, that may mean you're having more people contribute to the monthly budget and running of the household, but your utilities may go up. Whatever you do, make sure your own needs are met first and you keep contributing to your retirement, Williams said.
“At minimum, consider getting your full company match. And then just consider disability insurance, because if something were to happen to you and you can't work, you still want income coming in, even though it's probably, depending on payouts, 60 percent of what you're giving," Williams said.
“There's a lot of stress on the sandwich generation. You just want to make sure that you're still able to be healthy, get a break if you need it, and take care of your financial responsibilities."
Starting the conversation
It's often awkward to talk about highly personal financial and health information, even with family. It doesn't have to be done all at once and solved overnight, though. You can perhaps lead into it by sending an article, or talking about a mutual friend in a similar situation.
“I know it's difficult, it's going to be sensitive. Your parents are probably embarrassed that they're having to be in that situation," Williams said. “Just put yourself in their shoes. You might be a little embarrassed to have it happen, so always be respectful, be sensitive, and these aren't conversations that are going to be resolved in one day."
Talk to your siblings, as well. Williams suggests something along the lines of, “Hey, I'm planning on talking to mom and dad about this. Do you want to be around for the conversation, be a part of it?" She said that one sibling is generally the ringleader, and that everyone should be upfront about the support they can provide.
It's also important to make sure the kids don't feel neglected as attention turns to the parents. What can you do to include everyone? How can you create parent-child time alone?
And finally, Williams said, if you're married, keep clear lines of communication open with your spouse in order to avoid additional strain on the relationship. What happens if both sets of parents need help? What happens if there are personal conflicts?
Sure, there are challenges to taking care of parents and kids, but there are also benefits, Williams points out. “Three generations in one home, family unification, good memories. That's how that can work. If you have the financial flexibility and wherewithal to do it, you'll feel good about taking care of your family."
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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