You have many needs and goals for your hard-earned money, and it can be stretched thin if you're financially supporting several generations of loved ones. Yet millions of Americans are doing just that, and at the same time many are delaying retirement and working to recover lost value in property, investments and net worth. Record numbers of grandparents are raising young children, young adults are living with their parents into their 30s, and middle-aged people are supporting both their living parents and dependent or adult children.1 How can you cope?
Whatever your situation, a strong financial plan helps you juggle challenges and stay on track for your long-term goals. If you are living with or supporting several generations of family members, the most important thing you can do—for all of you—is to create a plan that focuses first on your own future. Just as you should put on your own oxygen mask before helping others on an airplane, having a strong financial plan in place puts you in a better position to help loved ones when they need it most.
Here are some strategies to consider when you are trying to meet the needs of multiple generations:
- Account for Longevity
The average American is living longer; a man who is 65 today has a 50 percent chance of living until age 87, and a 65-year-old woman has a 50 percent chance of living until age 90.2 Knowing that retirement could last 30 years or more for you and the elders you care for, you must consistently save for your own future as you help others manage their income and expenses. Plan for the risks that you and loved ones could face in retirement, including inflation, taxes, market fluctuations, healthcare costs and the potential need to pay for long-term care.
- Document the Details
Ask all family members to assemble and document their personal and financial information so others can manage their affairs in case of an emergency. This includes updating beneficiary designations on financial accounts and insurance policies, keeping records of online accounts and passwords, having a current will and powers of attorney on file, and outlining specific health care wishes in a living will. People with minor children should name a guardian and financial arrangements for the children in case of the parents’ death.
- Have Courageous Conversations
It’s not always easy to offer emotional support and manage the demands of multiple generations, personalities, living arrangements and family schedules. Sometimes it seems easier in the moment to avoid a conversation about something that concerns you than deal with a difficult topic or someone’s reaction. However, this normally leads to more difficulty later. When conflict arises, address it quickly and directly, showing you are willing to communicate, listen and keep an open mind. The positives can far outweigh the negatives when you keep the lines of communication open and focus on what is best for everyone.
- Inspire Self-Reliance
Encourage family members of all ages to take as much ownership of their personal finances, decisions and consequences as they can. This prepares younger people to live independently and encourages adults to handle their responsibilities rather than relying on other family members to do so. Creating an individual financial plan is a valuable exercise for all ages. Whether you are just starting out or living in retirement, it’s good to periodically examine your current obligations, decide on goals and priorities, confirm a realistic budget and ensure you have an emergency fund for contingencies. Younger people benefit from committing to a savings habit, and elders want to be clear on their strategy to use their retirement assets. A financial representative can help in this process.
- Use Technology
A multitude of tools are available to help families keep in touch, stay healthy and safe, and manage various activities. Explore and deploy technology where it can help you the most, whether with online banking, health care tracking, free conference calling or Skype for long-distance family meetings, or TheMintGrad.org to empower young adults to carve a path toward financial independence.
- Manage Legal and Financial Risks
Understand the legal and financial implications of family decisions, and avoid undue risk where possible. Buy appropriate insurance to protect your property from damage or personal injury and to replace income lost in the event of disability or death. Keep your own goals top of mind, and be careful about co-signing for others’ financial obligations unless you are prepared to pay in full if they default. Also, be aware of laws that could impact your family—such as the strict income and asset limitations involved in qualifying for Medicaid and the filial responsibility laws in many states that can hold adult children responsible for expenses incurred by their elderly parents.
- Protect the Future
Those who want to provide for family members’ future needs after they are gone may want to consider establishing a trust. Trusts can be designed to suit a family’s specific goals, including distributing assets or life insurance proceeds to surviving spouses and heirs in multiple generations. The trust can specify the timing and parameters for distribution while protecting funds from divorce, creditors, estate taxes and mismanagement. A financial representative can connect you with resources and help you decide if a trust is right for you.
- Tap Community Resources
Some say “it takes a village to raise a child,” and the same applies to managing aging family members’ needs. When you need help beyond what family members can provide, local community and state agencies can offer valuable advice and expertise on a range of topics. Hospital social workers, health plan nurses and the local Council on Aging can point you to medical care options, senior living facilities and special services. The AARP website and www.medicare.gov can help demystify the financial realities of Medicare, Social Security and other critical financial issues.
If you’re living in one of the more than 4.3 million households with multiple generations—or are managing the demands of children, extended family and elders all at the same time—you don’t have to do it alone. A financial representative can help you set your own course and put your family members on the right financial track now and into the future.
1Pew Research Center, Social and Demographic Research, 2013; At Grandmother’s House We Stay; A Rising Share of Young Adults Live in Their Parents’ Home; The Sandwich Generation
2Annuity 2000 table with mortality enhancements determined by using projection scale G2.