5 easy financial tips for parents who take care of parents
Having a close relationship with your family is a great privilege, and for those who care for both their children and their parents, seeing the generations within their family interact can be a source of joy. As your parents age, however, there's a lot of added responsibility. Caring for a parent while also raising your own children can create both emotional and financial stress. You want to enjoy your time with your aging parents and young children while also balancing your own goals.
Americans in their 40s are most likely to be considered part of the “sandwich generation,” a cohort of adults who are caring for a parent 65 or older and raising at least one child younger than 18 or providing financial support to an adult child.1 Almost 25% of working Americans are in this category, providing care to an older or sick adult while also raising a young child. What does this do to a caregiver’s well-being?
The emotional and financial toll this stress takes can’t be denied — only 43% of parents say that their emotional health is very good, and only 43% say that they are very good at managing their finances.2 There are some simple strategies parents in the sandwich generation can take on to ease the pressure.
We know you’re busy. Let’s keep this easy!
1. Have a conversation with your parents
You chat to your parents every day as you care for them. Turn the conversation to finances. You may feel uncomfortable talking to your parents about their finances, but doing so can benefit you and them. Begin by letting them know you’re coming from a place of love and reiterating that you want the best for them. You’ll want to discuss important questions, such as how much retirement income they expect to have, and how they plan to address issues like housing and medical expenses. This will help everyone gain a clear understanding of their big-picture plan, or help them come up with one if they don’t know.
Speaking to your parents early on and maintaining open communication can help you avoid unpleasant financial surprises. It will also allow you time to find out about your assistance options.
2. Save with professional guidance
Who says you have to do it alone? Outsource your financial stress. Get guidance from a financial professional who will make quick work of putting together a financial strategy. This will help you put away money for your own retirement in gradual, less noticeable increments, while still allowing you to plan for life’s other expenses.
Is life insurance part of your financial strategy? It can help ensure your family is taken care of if the unthinkable happens. If you’re a policyholder already, you’ll want to make sure you and your family are covered, and your policies are up to date.
3. Use a savings plan for your child’s education
Created by the government, 529 plan accounts were designed specifically to encourage college savings. Money must be set aside in the plan from your already-taxed income, but the interest that money will collect isn’t taxable.3
Here’s a way to save for college without having to think about it: Switch your credit card to one that connects to your 529 account. Then, instead of earning points for flights or rental cars, for instance, you’ll earn cash back to your child’s 529 college savings plan.
4. Create a spending strategy
Avoid relying on credit or regularly spending more than you can afford. Work with your family to create a realistic budget, and make sure everyone commits to sticking to it. Don’t forget to account for your savings strategy and give yourself some wiggle room for unexpected expenses.
One guilt-free way to spend your money is to create a new bank account dedicated to fun. This could be for travel, new furniture, or for shopping. Allot a certain percentage of your paycheck (say, 5%) to be automatically deposited into this account. You don’t have to do a thing, and you will see a small amount of money continually grow for you to spend guilt-free. Your main bank account can be for your rent and groceries. Whatever you choose to spend this money on should be fun, not duty.
5. Pass on good money habits
Parents teach their children a lot. But when it comes to money, parents sometimes neglect to talk about it, and the topic becomes shrouded in secrecy. Kids learn by observing their parents, and as they grow into adulthood, they inherit their family’s unspoken financial habits. If you and your partner have kids, encourage open conversations about money within your family, so that everyone can understand your mutual financial goals. That way, you can avoid passing on the money taboo to a new generation.
For better or worse, the money talk requires patience and attention at every step. From your very first date, to passing on strong values to your children, to planning for retirement, it all starts with having an honest conversation.
Parents, you’re doing a great job. Incorporating even one of the strategies above will make a difference to your financial life. But if all else fails, remember to breathe. We’re here for you.