Penny Wise: Saving tips for the sandwich generation
Exercising discretion about spending and saving at different points in your life are important
There comes a time in one’s life when many become responsible for the well-being of not just themselves, but of children as well as parents. Referred to as the ‘sandwich generation’, a lot of people, especially the ones between 40 and 60 years of age, find themselves caught in the middle in many ways. Shweta Sardana, a senior sales executive, for instance, splits her time, energy, and money in taking care of her children in Dubai and elderly mother in India. “It is a difficult balancing act, which has become more strenuous during the pandemic owing to long lockdowns, limited flights, salary cuts, and paranoia about the viral disease. During the pre-Covid era, I was remitting Dh2,000 a month for my mother’s routine care and upkeep. During Covid, this shot up to Dh3,000 and at times Dh3,500. Our expenses rose but salaries shrunk,” said Sardana, who is the only daughter.
Remarkable gains in life expectancy over the past 50 years have meant retirement life is more or less equivalent to the work life for many. And while this is happening, a lot of people are outliving their retirement savings and relying on financial help and care from their children, who are caught in the middle — raising their own families and taking care of the parents as well.
While every individual’s priorities are different and unique to their circumstances, there are a few things that can help individuals and families stay emotionally resilient and financially well.
If you are in your 20s, and just started working, know that you could become a part of sandwich generation in a decade or so. Having frank conversations around money among family members can help. Learn about the household expenses of your parents, know how they plan to fund their retirement and while you do so, wean off from allowances from parents, if you take any. Start investing as much as 40 per cent of your incomes in equities for it to take advantage of the power of compounding. Significant savings and investments early on will shield your financial goals while preparing you to take on additional financial responsibilities, if needed.
If you are in your 30s or 40s, gain an understanding of their expenses and income sources, know how would parents like to spend their retirement. Find out if there are debt payments that could get stretched after the parents retire. Such conversations are especially important if children are living in different cities, or in different countries. Upon retirement, explore the possibility of your parents joining you and staying in the same house as your family. You could save by not maintaining two households. If the plan is to retire and continue living as before, retired couples can look at unlocking home equity to fund living and care expenses or invest for income. Fixed deposits with banks and dividend-yielding stocks are some of the good options.
Also, getting a health insurance policy for parents, if they don’t have one already, can protect families from unexpected medical bills, which can significantly dent personal finances. Remember, buying a health insurance policy at an older age comes at steep premium.
In your 50s, know that medical bills could bring up the most unexpected expenses. Ensure everyone in the family is insured and has adequate coverage. Having a budget and reviewing expenditure every six months or so can bring clarity. Talk about expenses, and money issues, set the expectations right and don’t deal with money in an emotional manner.
Money conversations are tough, especially with older parents, but they need to be done. Downsizing houses after retirement is a good way to fund retirement expenses, and older parents, if staying separately, should be encouraged to exercise this option.
Members of the sandwich generation will be pulled in many directions, but it’s important to not lose sight of your own needs and goals, which underlines the importance of budgeting well and having financial goals and plans in place. Going with the flow, without giving a thought to how your money is saved and invested, can bring unnecessary stress. Invest early in equities and stay invested.