Financial Survival Tips for the Sandwich Generation
Planning a financial life for yourself is complicated enough with competing goals such as pursuing a career, raising a family, saving for college and saving for retirement. But what about when an aging parent needs help or when an adult child moves home? If you’re a member of the sandwich generation, the people in their 30s or 40s who bear the responsibility for financially taking care of both their parents and/or children at the same time as themselves, here are some financial survival tips.
Meet Sandy of the Sandwich Generation
Being sandwiched in between several conflicting and serious responsibilities isn’t something anyone necessarily plans for, but as the following example illustrates, it’s easy enough for almost anyone to end up there.
Let’s take Sandy, a married 47 year old radiologist from La Jolla, California. As a physician specialist, she makes a decent living, but the income didn’t come without a cost. She’s battling her student loans, even at this stage in the game. She’s earning a high salary, but at the same time much of it is consumed by taxes and professional expenses such as insurance and continuing educational requirements. Moreover, because of the demands of her work, Sandy is often forced to hire support staff to assist with her home and domestic responsibilities.
Sandy’s financial picture isn’t flawless to begin with…and that’s less than half the picture, by the way.
Sandy has 15 year old and 12 year old children who are talented students. One wants to become an ultrasound technician, following in her mom’s footsteps. The other one hasn't found a specific career ambition yet, but does wish to attend a four year university. Although she’ll be on the hook only for ultrasound technician school for her younger child, she still feels obligated to put aside more than the cost of her training for her so that she doesn’t feel shortchanged in comparison to her sister.
Typical story, right?
Now on top of that, Sandy recently lost her father, leaving her mother spouseless and in need of caretaking services that Sandy must help pay for. Sandy’s husband’s parents live independently at the moment but when they become unable to care for themselves the plan is for them to move into Sandy’s home. The hope is that the timing of this will coincide with Sandy’s children going away to college, but there is no guarantee that it will, or that Sandy’s children will live away from home while attending school.
Whether it’s is a spicy Reuben or a classic tuna fish, the Deli has served up Sandy quite a sandwich to digest. In fact it’s completely overwhelming for most people.
If you find yourself inevitably sandwiched in between a rock and a hard place, what can you do to avoid a bad case of indigestion?
Financial Survival Tips for the Sandwich Generation
Realize that while nobody has complete control over their life, we do have the ability to control as much as possible by creating a financial plan.
The general steps we suggest that people take as part of our financial survival tips for the sandwich generation are below:
Prioritize goals. For Sandy, it means sitting down as a family and figuring out which needs are the most immediate and which can wait.
Figure out resources. Who or what can you call upon? Gather information about what is available to you in terms of time, money, family help, and public or private resources. Consult the wise Google for answers on this one!
Develop a long-term plan that takes #1 and #2 into account. As this differs depending what stage in life you fall into, we go into each type of plan below.
It’s never too early to have a conversation with aging parents. Do they have all the bases covered? Make a checklist that includes long term care insurance, wills, trusts, and health care proxy designations.
It’s important in your planning with aging parents to clarify how the family would like the transfer of responsibility from parent to adult child to happen. Come to an agreement with all family members involved who may be sharing in this responsibility. For Sandy, the family would meet together – Sandy, her husband, and both sets of parents.
Start the conversation with high-school age children to define parameters based on realistic goals and financial obligations. Have you started a 529 account? Gather information about other resources such as loans, scholarships, grants, and work/study programs.
For Sandy, college planning would mean having a family meeting with her children and husband as well as follow up meetings with perhaps a college planning expert or school guidance counselor.
Don’t wait until your kids graduate from college to have the conversation. Initiate conversations with college age children to set expectation and help establish financial independence. Offer guidance and loving support, not just the promise of a “free ride.” If moving home can not be avoided, consider charging rent and/or asking them to contribute to pay for their share living expense. Have an exit date that is mutually agreed upon.
Your Own Retirement
Many people in the sandwich generation tend to put their own financial needs last. We caution you against doing that. Sacrificing your own financial health for others may backfire by weakening the strong foundation that a family needs. So continue putting money away for your own retirement as much as possible, and don’t forget to review your own financial plan that takes into account your personal milestones.
In Sandy’s case for example it would mean working on a debt paydown plan and making sure that she sticks to it at the same time as utilizing the Health Savings Account and the 403b plan from her work. Using this strategy may result in more favorable tax consequences.
Don’t do it alone
Even the Reuben sandwich comes with a side of fries. Realize that you don’t have to fight this battle alone. Find a trained, experienced financial advisor whose guidance you can trust and gobble up all they have to offer!