Best Money Habits for the Sandwich Generation
What is the sandwich generation and why do people belonging to it need financial help? These are people who are caregivers of both their children and their aging parents. This generation typically applies to people in their 30s and 40s. Every parent knows how much it can cost to look after children, but the sandwich generation also has to spend money and time on their parents.
If you are part of the sandwich generation, it is challenging to stretch your finances to cover the younger and older generations. Even if you took all the financial precautions and built up a generous savings, taking care of two generations can quickly burn through your funds. Fortunately, there are some financial options available to help you save money without sacrificing the quality of care for anyone who is dependent on you. You can help yourself, your parents and your children to live better by being pro-active in organizing your finances for the here-and-now as well as the future.
You Need a Budget for Later in Life
The first thing you need to think about is a retirement income plan. While saving for retirement might not be a cash management priority for you right now, you may find that it should have been when the time comes. If you do not sort out your finances for later in life, you are sure to find it difficult to balance financial assistance for your kids and parents as well.
Many factors can affect your retirement income, such as inflation, taxes, your return on investments and savings, the duration of your retirement and your pensions. By setting up a retirement plan, such as an IRA or a 401(k) plan, you can take control of how much money you have when retirement age comes around. Make sure you meet any matching contribution programs’ criteria and try to pay in more than the minimum amount.
How much is reasonable to save for your retirement? While the total amount depends on your spending habits, the best financial advisors say to aim to replace between 70 and 90 percent of your income. Consider using a retirement calculator to determine how much you should be setting aside for later years.
Financial Help for Long-Term Care for Your Parents
The older your parents get, the more care they need. Seniors who are 65 years of age and older have a 70 percent chance of requiring a form of long-term care. As a result, it is worthwhile to look at ways to save money for care for your elderly parents. Nursing homes can be expensive, but in-home care is not always more affordable. The sooner you review the types of care available, the more prepared you can be.
One way of preparing for the cost of care is to take out an insurance plan. One of the best plans to get help with medical bills is the Long-term Care Partnership Program. This is a state-operated, federally supported initiative. By getting this type of plan, a portion of your assets is protected.
Whether you use all or some of the policy’s benefits, those benefits are disregarded when calculating your eligibility for the state’s Medicaid program. This basically means you are able to keep your assets up to the level of policy benefits you paid under the coverage, so you do not have to spend those assets before becoming eligible for Medicaid.
You Need a Budget for College Funds
Tuition fees have unfortunately risen dramatically over the last couple of decades, so the sooner you start planning for your children’s education, the better. If you are on course to reach your retirement income goal, you can start to think about saving for your kids’ college.
There are various ways to save money for higher education including college savings plans you can pay into. Alternatively, you can reduce the cost of your children’s education by saving for a two-year public college, rather than a four-year private one. There are also grants, scholarships and work-study programs available to ease the financial burden.
The most popular college savings plan is the 529 plan, which is sponsored by individual states, educational institutions and state agencies. The 529 plan actually consists of two different plans. These are the Education Savings Plan and the Prepaid Tuition Plan.
The Education Savings Plan allows you to open an investment account in which you can save for the future of your children to cover higher-education expenses like tuition fees and accommodation. You can use the money in this plan’s account at any university or college in the country rather than trying a cash envelope system at home. In fact, you can sometimes use it for universities and colleges outside of the United States.
The Prepaid Tuition Plan allows you to buy credits or units for participating universities and colleges. These can be used for future mandatory fees and tuition fees set at current prices. Generally, you cannot use the funds in this type of account for room and board at universities and colleges, but there are some exceptions.
Other Money Saving Tips
The greatest rule for making your finances work for you, your children and your parents is to take control and be prepared. The more thought you put to the situation, the easier it is to get yourself organized. If you do not prepare and find ways to save money, you will not only find it difficult to pay for everything, but you will also experience more stress than you are already facing in both the financial and emotional sense.
There are many other things you can do to help the financial situation of you and your dependents. Here are a few great ideas:
- Make changes to your budget. If you are struggling to pay for the care of your parents and the schooling of your children, you can make cutbacks. This does not have to be a permanent alteration, but if it allows you to have a better long-term financial situation, it is most certainly worth doing.
- Talk to a financial advisor. There are many financial planning services to help you stay on track. There are some free services, but even if you have to pay for the service, it is worthwhile if it means you are heading towards a more financially secure future.
- Consider a spending tracker. If you are having trouble with managing a budget or even setting one up, an application may assist you. Many banks and credit cards offer electronic means of tracking your spending habits and allow you to check where your money is going.