Many of us are finding ourselves in the position of raising kids and helping our aged parents as well. If you are one of those who is splitting time, energy and money between caring for their children and parents then you belong to the sandwich generation. This can be a tough act to balance and requires professional guidance and judicious management.
Every individual’s circumstances and requirements are different. Maybe you have a young family and parents who require very little assistance from you. On the other hand, you might have a young family and parents who are entirely dependent on you. This means that you might need to focus on saving for your children, saving for your own goals and generating enough income to provide for your parents. In order to strike a good balance between all your responsibilities, there are a few steps that you must take:
Step 1: Have a detailed discussion with your parents about their requirements
If you are to optimally manage the sandwich situation, then you first need to understand your parents' needs, goals and resources. In most families, money has always been a delicate matter and discussing the same is considered taboo. However, open communication is the first step towards arriving at a feasible solution. Do a financial inventory with your parents to understand their income sources, living expenses and debts. If your parents have a pension income or any other source of regular income, own their own house and are otherwise debt-free then you might not need to provide them with much financial support. On the other hand, if they do not have any one or all of the above, then you will need to support them financially and therefor plan accordingly. It is also important to know where they keep their documents and who the nominees to their investment and insurance plans are.
Step 2: Determine your children’s future needs and distil them from your personal goals
As a parent, you would definitely like to provide your children with the best and ensure that they have a comfortable future. To achieve this, you will need to save for their education and possibly even plan to buy them a house eventually. On the other hand, you might have your own goals related to purchasing a house or a vehicle. It is important that you clearly bifurcate these goals to determine the investment time horizon. Additionally, it is entirely possible that your current income might not allow you to save for all your goals. In that case, you will have to prioritise and put the goals related to children first.
Step 3: Discuss your circumstances with your financial planner to arrive at a comprehensive and effective financial plan
Generally, when you make a financial plan, you consider your risk profile and return requirements to arrive at an optimal portfolio strategy. However, for the sandwich generation, the requirements are a little differentiated. For example, as a 45-year old couple, you might generally not need to think about generating current income from investments. However, if you are also taking care of your parents, then you need to ensure that your investments are generating some income that can be channelized towards your parents. Clearly, this can get complicated. A financial advisor can understand your unique circumstances and guide you towards creating an optimal portfolio that can help you strike the required balance.
It is always advisable to consult a financial advisor while creating long-term financial plans. However, certain circumstances like the above, make the presence of a financial planner absolutely necessary.
