At times it can feel like a veritable juggling act—managing money for your household, trying to instill your children with strong financial values, and at the same time taking over more and more of the financial responsibilities from your aging parents. According to a recent Gallup poll, one out of every three adult investors is providing some measure of financial support to an aging parent or adult child; many are trying to support both. 1
That’s three generations of wealth that you need to either directly manage or exert some significant influence over. In each instance, however, there are very different needs and objectives. So where do you begin?
More than two-thirds of caregivers are female, with the average caregiver being a 49 year-old full-time professional woman who provides an additional 20 hours per week of unpaid care to an aging mother.2 While that general profile probably comes as no great surprise, the time commitment should.
With many of us so tethered to work by text, email and laptop, the physical 40-hour workweek has quietly expanded into something closer to a 60-hour workweek. Add care demands on top of that, and it’s a recipe for physical and/or emotional exhaustion.
First and foremost, you have to take care of yourself, because if you’re not around, who’s going to take care of everyone else? Of course sacrificing for others is noble and admirable, but remember that your physical and financial needs MUST come first.
In surveying investors who are financially supporting a parent or adult child, TD Ameritrade found that 22 percent of respondents indicated they have tapped into their savings to pay for care, they’re carrying significantly higher credit card debt (an average of $22,000), and more than a third have postponed saving for their own retirement. 3
Preparing the next generation
As parents, it’s our job to worry about our children—whether they’re four or forty. We want to give them the world, while also protecting them from some of its harsher realities. It’s about much more than just money. We want to help them become more fiscally responsible, ethical and charitable; we want them engaging and connecting with the world and others in a way that’s both generous and prudent.
Make it your goal to pass on not just money, but your personal financial values to the next generation. Sit down and have an open, honest conversation about how you generated your wealth, how you’ve used it for the betterment of others, and how you want your kids to perpetuate it.
Talk about the financial mistakes you’ve made along the way, the lessons you’ve learned, and the things you wish you had known when you were their age. Our Preparing Your Family to Inherit Wealth worksheet can prove invaluable in helping you facilitate this discussion.
Providing for aging parents
While it’s noble to want to care for your aging parents, it can be an emotionally and financially draining endeavor. Women who decide to take time off from work—whether cutting back hours or requesting a leave of absence—not only see their income directly impacted, the decision often has a ripple effect on their retirement plan savings, pension payouts and even their Social Security benefits. Simply put, it’s a decision that could threaten your financial future.
In many cases, it may be a much smarter financial decision to seek out the services of professional caregivers to support your parents’ needs while you keep working. If you have the resources, you might also want to consider purchasing long-term care insurance for your parents if they can’t afford it. Don’t be shy about asking other family members such as brothers and sisters to chip in either financially or with their time.
Your financial advisor can help you create a budget that encompasses both present and future care needs, as well as a system to record all costs to prevent any family disputes. He or she can also help you avoid common financial mistakes caregivers make, such as comingling their assets with their parents’ for bill-paying convenience, only to find out that by doing so they’ve rendered their parents ineligible for Medicaid benefits.
While it's only natural to want to do all you can for those you love, the most important lesson to remember is that you can’t do it all by yourself. You need help from your immediate and extended family, from your employer, from your friends, and from a trusted financial advisor—someone who understands the complexity of your financial and caregiving responsibilities. With some thoughtful and comprehensive planning, not only can you provide financial and emotional support to your parents and adult children, but do so without sacrificing your own health or financial future.