If you’re a member of the Sandwich Generation, those caring for both their parents and children simultaneously, you are in good company. In 2012, the Pew Research Group found that 47% of adults age 40-59 had a parent over 65 and were still supporting their own children. About one-in-seven were providing financial support to both their parent(s) and child(ren). (1)
Between increased longevity and the difficulties many young adults face gaining a financial foothold in today’s economy, more and more people are finding themselves a part of the Sandwich Generation. This group spans from Millennials all the way to Baby Boomers, with a good portion of Generation X in between.
Trying to balance taking care of children and aging parents can be formidable. It requires a lot of emotional energy, time, and money. Though you can’t wave a magic wand and make it all easy, there are some things you can do to keep your loved ones from squeezing your financial future.
Understand Your Options
One reason many people make unwise financial decisions is that they don’t know that they have better choices. If you are going to navigate helping two generations at once without sacrificing your own financial stability, you will need to find all of the options available to you.
Our current student loan crisis is evidence that when it comes to college, most people just follow the crowd instead of evaluating their options. Not everyone has to go to a 4-year university to have a successful and fulfilling career.
Even if your child needs a degree for their chosen field, there are a number of affordable options. Community college is a great option; one that Steve Jobs, Walt Disney, and George Lucas all took advantage of. (2) They can also earn cheap college credits through Advanced Placement courses and other credit-by-exam programs.
There are even more options for your parents than for your college-bound children. It is important to understand the different financial options available to them through their insurance policies and pensions.
Also, there are a lot of organizations dedicated to helping the elderly. Research faith-based organizations and disease-based organizations, such as the Alzheimer’s Association. You can find local government agencies through the National Association of Area Agencies on Aging’s website. If your parents are in California, make sure to understand when they would be eligible for Medi-Cal for long-term care.
Set Clear Expectations
Once you are aware of all your options, you can start planning. Planning only works, though, when everyone is on the same page. It is vital to set clear expectations from the onset to avoid financial and relational problems later on.
School choice is one of the greatest determinants in the overall cost of college. Your kids need to understand that they can’t just pick any school, and you should make this clear well before they even start applying.
Communicate clearly with them how much you can afford to contribute to their education and any expectations you have of them in return (grades, lifestyle, holding a job, etc.). You also need to discuss what, if any, financial help you are willing to provide them once they have graduated or with any student loans they take out. Lastly, you should not sacrifice your own retirement savings for your children’s college education.
Setting clear expectations with parents can be a delicate matter, but it’s vital to maintain healthy relationships. Does your mother plan on moving in with you and having your spouse care for her? How does your spouse feel about that? Are you willing and able to visit your parents in their home regularly and maintain it when they are no longer able to? It may be difficult to tell a parent that they will end up in a nursing home, but most people in your position aren’t physically or financially able to maintain two households.
Another thing you need to get out into the open is your parents’ finances. Older generations kept their finances more private, but you need to know what you have to work with if you’re going to be helping them. Most people are too shy to bring up the topic until it is too late, so don’t procrastinate.
Once you know what you have to work with and everyone is on the same page, you can come up with a game plan. You probably should come up with a Plan B and Plan C as well.
Make a plan to start saving towards your kids’ college if it’s feasible in your situation. Start working with them on their grades, extracurricular activities and SAT preparation. Once in high school, they can begin researching scholarships and writing practice essays.
Have your teen get a job to save for college and begin learning to manage money under your direction. Their work ethic and money management skills will have a much greater impact on their future financial success than which college they attend.
Map out the cost of an extra semester or two of undergrad or graduate school, and show them how that will affect their finances. And don’t forget to think about their inevitable job search. A great education will be useless if they haven’t developed the skills necessary to get and keep a job.
You and your parents need to sit down and discuss how you will handle different possible situations, what care you are willing to provide personally, and how much you can realistically afford to help them financially if needed. It’s important to maintain a balance between compassion and common sense, without letting emotions distort things.
On the legal side of things, you need to make sure that your parents have a will, advanced directive, power of attorney, and all necessary insurance. These things are easy to overlook but can make a huge difference in the amount of time and money it will take to get things done in the future.
You may feel as if you’re fighting a battle on two fronts, but you don’t have to do it alone. There is an army of trained professionals out there waiting to be mustered.
For your parents’ specific needs, you may need to work with an estate planning attorney, social worker, or geriatric care manager. An experienced financial advisor can not only help you sort out your parents’ finances, but can help you plan for your children’s college and your own retirement as well.
If you want to be proactive and avoid having your parents and children squeeze your financial future, give me a call today at (949) 221-8105 x 2128 or email me at [email protected]. Together we can come up with a plan where all three generations can enjoy life while focusing on what really matters, family, not finances.
About Mike Loo
Mike Loo is an independent financial advisor with more than 20 years of experience in the financial services industry. His mission is to provide a meaningful impact on the lives of clients and the people they care most about, help them make educated decisions with their money, and build a strong financial foundation for both themselves and their next generation. Mike is committed to meeting a high standard of excellence, taking the time to listen to clients’ needs, and designing strategies that aim to help clients save money and reduce debt. He seeks to fit a client’s investments into their life and educate them so they’ll understand their investments. To learn more about how Mike may be able to help, connect with him on LinkedIn, call his office at (949) 221-8105 x 2128, or email him at [email protected].
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Trilogy Capital, a registered investment advisor. Trilogy Capital and Trilogy Financial are separate entities from LPL Financial.