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If you’re supporting children as well as parents or other family members you’re part of the sandwich generation. It’s an additional responsibility that can put your financial plans at risk. However, by making a few smart financial moves you can protect your income and your future savings. We take a look at how you can manage the extra financial demands of being part of the sandwich generation.
Caring for loved ones is a privilege but your finances need some love too
Caring for family members and extended family isn’t new, especially to South Africans. But it can place an enormous financial and emotional strain on income earners. It is estimated that over 40% of South African earners are the part of the sandwich generation, supporting older and younger relatives, and it does take a toll on their finances. Some of the financial effects of being the supporter include:
- Constant pressure to balance the budget and manage day to day expenses, including taking on new debt and struggling to pay existing debt
- No or low emergency savings
- Not enough saving for future goals, including retirement
- No or low funds or plans for medical expenses
It’s great to be able to care for loved ones whose circumstances aren’t favourable. But if it means you drain your finances the situation will never change and each generation will be financially dependent on another.
Build a cycle of financial independence
Protecting your finances can help build a cycle of financial independence where future generations can grow their wealth. These are some of the steps you can take:
Have enough life and funeral cover
Having enough life insurance will ensure loved ones can be cared for when you pass and having enough funeral cover will pay the costs of a beautiful send off.
To work how much life insurance is appropriate, ask yourself how your loved ones would be cared for when you pass to make them financially secure. Your budget can guide you as to what is a suitable amount, or you can use one of our online calculators, speak to a skilled 1Life Insurance consultant or a financial adviser for assistance and advice. Ideally, the sum assured will be enough for living expenses for those you support and to pay off any debts you have. But make sure it is affordable and within your budget. Some cover is always better than none. Insurers and financial advisers can help you find the best cover for your needs and budget
Funeral plans allow for family members to be covered on one policy which usually means a lower cost than if there are multiple policies. Find out which family members have funeral cover policies and consider combining all the policies onto one to save money. And check that all your dependents are covered on the policy.
Review and manage your budget
Any income received needs to be part of the budget and expenses need to be carefully planned and monitored. Budgeting is an art, not a science, so there needs to be some room for flexibility as well as a cushion for higher than expected costs. Include all the family members in your household and those you support in your budget discussions. Adult children who live with you can share the budget burden as can many elderly relatives. They may also qualify for grants and/or bursaries for further study.
You can also actively look for ways adult children and older, able family members can contribute to the budget in kind. This can be childcare for the very young, cleaning, cooking and more. If you can save R1 000 a month on childcare you can boost your budget!
Top tip: savings, investments and insurance can protect your family from future financial crises so these need to be included in the budget as essential items. They are not a luxury.
Have a plan for medical care costs
Don’t let these drain savings and put you in debt when they happen. Find out what medical aids are available and affordable, who can be placed as a dependent family member on a plan, and what other plans are available such as a primary healthcare plan that pays day to day expenses and hospital plans that pay for hospital stays. You can also find out what free services such as clinics are available, who qualifies for free treatment such as the very young and very old.
Emergency funds
More people could mean more opportunities for emergencies so try to build this up. It can also act as a buffer if you are unable to work for some time.
Save for your retirement
A little will make a difference, and it will also mean you have something and don’t have to rely on relatives in your later years. Remember, these are an essential expense!
Wills and estate planning
Your will may need to be updated so that financial dependents benefit and will have money when you pass away. You may also need to make provision for relatives you care for in addition to children and parents. Truth About Money, a 1Life Insurance initiative, offers a free Wills and Estate benefit to help you draft and update your will.
Set financial boundaries
Be clear on what you will and won’t do such as lend money to family members you are supporting. And be wary of standing surety for loans for family members. If you are not 100% confident repayment will happen, don’t offer the funds or your signature as surety, it could put your financial plans and budget at risk.
Get support
Ask for help from other relatives, community and healthcare workers if you need it as well as financial advice from a registered financial adviser. Don’t take on burdens you cannot cope with as these can jeopardise your health as well as your finances.
Balance and appreciation
Appreciate your loved ones and care for them - within your means. When funds are limited and there are many demands, you need to be frugal and firm but also fair. While you can offer care and support, focus on protecting your wealth and aim for financial independence for all your family members, including yourself.