By Madri Jacobs, 27 January 2020
It’s still early in the year, so perhaps now is the perfect time to consider how to ‘nail’ your finances for the year ahead. Your financial adviser should take your ‘sandwich position’ – your dual care duties – into account and help you to make provision for yourself in the same way you lovingly make provision for others.
Madri Jacobs, Financial Adviser at Sanlam, says, “If you are a family member who provides for your children, parents and/or siblings and the wider family – this could include people in your employment, such as a domestic helper – the question is, ‘How can I make this work?’ It’s vital to plan ahead and to have meaningful conversations upfront.”
Jacobs says a typical scenario would be a working couple with children in primary school who are caring for a retired parent. The parent moves in to save on paying rates and taxes on an additional home. The parent also helps provide childcare for the children, but the arrangement still puts strain on the couple’s retirement savings, especially as they assist with the parent’s medical expenses. This kind of situation isn’t an exception; it has become the norm. She adds that looking after the financial needs of three generations takes serious planning.
Jacobs lists some considerations to factor in to have the best chance of meeting financial obligations in the new year.
Determine the needs of your dependents, then look at how to finance these. Take your own needs into account as well. As an example, a bank could lend you money to pay for educational expenses, but a bank will not lend you money to provide income during your retirement. As advisers, we always caution clients against using their retirement savings to assist parents and children, since it will be almost impossible to make these up, due to the opportunity cost of compound interest and limits to one’s budget for future savings.
If you have siblings, chat to them about sharing the financial responsibility of looking after your parents. Have frank, loving conversations with your parents too. Sometimes arrangements can be made where you assist your parents but set up an agreement for repayment, for example, out of their estate (given that funds are available). It is grim to think about it, but one should also look at it objectively. Having said this – ensure that all family members’
wills are up to date. If people are comfortable to do so, discuss the content of the wills to avoid surprises down the line.
Priorities should include:
Jacobs concludes, “Set a new year’s resolution to meet with your financial planner and get guidance on how to navigate your unique situation.”