Wealth ManagementDo you have to juggle with your own financial needs and are also responsible for the care of your young children and aging parents? If yes, you are a part of ‘Sandwich generation’. Sandwich generation is the group of people who are bread earners to their young children as well as to their parents. Usually, these people are in their 40s. The biggest problem of your group is the risk of neglecting your own self-care while trying to help everyone else in the family.
Just imagine this case:
Ramesh and his wife (now, in their early 40s) have maintained well-paying jobs while raising two kids. They have set aside funds for their children’s education. However, with education costs increasing faster than inflation, they are uncertain whether these funds would be adequate.
Also, in recent months, Ramesh’s father has required extensive medical attention. While some portion of this cost is covered by his father’s own savings, still it doesn’t cover the entire cost. So, this expense has also become part of Ramesh’s expense. Ramesh and his wife are squeezed on one side by the cost of raising and educating their children and on the other side by the financial demands of caring for aging parent. What about their own retirement
What would the scenario have been if Ramesh and his wife had undergone financial planning exercise to consider any contingencies, which might arise in future?
- The exercise would have helped them plan for their children’s education.
- It would have recommended for a health insurance for all the family members considered while financial planning. This would have taken care of his father’s illness and the expenses wouldn’t have eaten away Ramesh’s savings.
- It would have also recommended a life insurance in the name of Ramesh and his wife as they are the bread earners of the family. This would take care of everyday living expenses or any debts which have to be taken care of. The objective of a life insurance is to make sure that the dependent family members do not suffer financially in addition to emotionally at the bread earner’s death.
- It would have recommended the required liquidity in their portfolio to meet any short-term contingencies.
- Above all, it would have taken care of their own retirement by calculating a suitable retirement corpus, which would have considered their expenses, inflation and their lifespan.
- There would be many such cases like Ramesh. Nearly half of adults in their 40s have a parent of age 65 or older and are either raising a young child or are financially supporting a grown child.
So, either if you are a part of this sandwich generation or are still in the mid-20s to mid-30s, you should consider the following points to avoid any financial stress in future.
Few points to consider:
With your parents:
- Talk Finances: You need to know where they stand with their finances. Will they only need your physical and emotional support or will they need financial support as well? If they need financial support, can you quantify the shortfall?
- Gently push them to take care of their Estate planning documents: No one really likes to talk about plans after they are gone, but it is essential that they have their estate planning documents in order.
- Talk to them about Health insurance: If your parents are young enough to get a health insurance plan, it might be wise to investigate those options together.
With your children:
- Teach your children good financial habits from an early stage.
- If you have adult children that need your support, create a plan for the degree of financial support you can comfortably afford.
- Educate your children about the benefits of financial planning.
- Try to cut down on non-essential expenses and try to save as much as possible.
- Think about ways to decrease your own debts.
- Have your life and health insurance in place.
- The most important thing: Work with a financial planner to determine realistic goals and expectations. A good comprehensive financial plan considers your current financial situation, while laying out a map for the future financial journey towards your goals.
- Execute the financial plan without procrastinating.
The best way to cope with the financial obligations is to have a financial plan and regularly reviewing it. Proactive planning will help reduce your financial stress if you are already dealing with the balancing act or you simply have concerns that you may have to deal with this in future.
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