If you find yourself supporting your parents or family members on your income, you are part of what is known as the sandwich generation. Walking the financial tightrope means being able to balance taking care of those you care about without pushing yourself into debt.
It's a juggling act that sees South Africans using 15% of their salaries to service debt and little to nothing to put away in savings. So how do you take care of your parents without damaging your finances? Here is what you need to consider when looking into family financial planning.
19,28 million South Africans spread thin
Between covering personal expenses, saving for retirement, and funeral plans, many South Africans find themselves spread thin. However, when it comes to creating a buffer in the form of an emergency account, only 34% of South Africans are prepared to face unexpected circumstances.
Anne-Marie Keyser, an Electronic Financial Advisor & Key individual, reveals that it is crucial to be open and honest with yourself and your parents.
"Open communication is key when it comes to family financial planning. Although any person’s financial situation is a contentious topic for discussion, it is very necessary to be discussed in an open forum including all members of the immediate family that may be affected or on whom any obligations of care may rest in the future.”
Where to start
Knowing where you and your parents stand financially can make the journey to family financial planning smoother. "Early indication of insufficient provision allows one to get ahead of the situation and put plans in place sooner rather than later," says Keyser.
The sooner preparations are made, the less impact these obligations will have on your finances." Here are a few suggestions Keyser suggests to include in the family financial planning discussions:
Seek assistance from a reliable financial advisor who will assess your and your family’s situation to find future value and benefits of your parents existing insurance products or portfolio.
Avoid making any changes without proper financial advice – it is recommended that investment portfolios are diversified and placed in lower risk options to provide higher security of your funds as one becomes more reliant on the capital for the future.
Find ways to cut back. This means assisting your parents on re-evaluating their budget to use the money towards investment portfolios that can come in handy later, such as life insurance, retirement annuities, funeral policies and any other existing policy that they may have on hand.
Downscale if possible. It may be necessary to discuss options for downscaling their residence and decreasing current expenses. In some cases, co-living arrangements with family may be beneficial.
Research for estimated costs. Knowing your numbers can help you realistically plan for future expenses. Enquire from local assisted or retirement communities to determine estimated costs. These can sometimes be fairly expensive, and a lot more than one expects or plans for.
Plan for your aging parents medical care. Having to deal with out of pocket medical expenses is something that can be expensive and damaging to your finances. Discuss how routine medical care and doctors’ visits will be handled and plan for potential hospital stays.
Every time you go home to visit your parents you pick up on small things such as how much their hair has turned grey, how the wrinkles in their faces have deepened and how they can be forgetful at times.
"It is always advisable that the family discuss the existence of a will – the will should be routinely updated and must be signed whilst the writers of the will are fully contractually capable," says Keyser.
The key lies in breaking the cycle of elderly dependence by making adequate provision for your retirement so you may live financially independent. Include your children in the family planning discussions as an educating opportunity that will help them when they are adults heading their own homes.