EXCELENCIA Solutions director and certified financial planner Clarence Jacob Chua discusses four key ways to avoid sandwich generation-related financial woes.
BEING Asian, our sandwich generation faces greater challenges than those in Western countries as our values and strong family ties compel us to care for our ageing parents and to provide the best for our children. Thus, to best avoid being in a sticky financial scenario, access your situation first to strike the right balance.
If you have siblings, everyone needs to be on board to discuss ways to share financial responsibilities. The burden will be less when shared, and, although not all will be able to chip in financially, everyone can offer some form of assistance. Financial issues, such as medical expenses, physiotherapy needs, domestic help, homecare nurses and daily expenses, should be discussed in great detail with siblings and the elderly involved. It’s important to discuss these issues with the elderly as they may have assets, for example, the family home, which can be refinanced or mortgaged to ease the burden.
THE next step would be to plan ahead; remember you should come first. You should place your retirement needs above everything else, as you don’t want to find yourself in a similar situation 20 years from now, being a burden to your children. Figure out the type of retirement lifestyle you plan to have, including travel plans and your own future medical needs. As a rule of thumb, one should have between 60 and 70 per cent of their last drawn income during their retirement years.
Besides your retirement needs, you should plan and save for your children’s education as early as possible. Today, many parents start saving for this before they have children. Some of the ways to do this include education plans from insurance companies, regular savings into unit trusts and buying real estate. Apartments and condominiums are good options because the rental income usually services monthly loan repayments.
Similarly, you should also start planning to save for your elderly parents as soon as possible, either through regular investment plans or buying property.
MEDICAL insurance is a must for yourself, your immediate family and your parents. Do not make the mistake of putting it off till a later time as the chances of qualifying for medical insurance greatly decreases with age while the cost of medical insurance premiums increase with age. Choose plans with fixed premiums instead of incremental premiums so that you don’t end up paying more as you age.
Most Malaysians are inadequately covered for income replacement or disability insurance, which is crucial if you are part of the sandwich generation, as any loss of income due to accident or illness will affect your dependents. As a rule of thumb, you should plan to have 70 per cent of your current earned income in the event of disability.
ESTATE planning is another crucial area which needs to be addressed. Unfortunately, less than 15 per cent of Malaysians have a legally binding will. Although some might think it’s a taboo to talk about such matters, it’s a practical need that should not be swept under the carpet. If you’re a caregiver in a sandwich generation, your own will is of the utmost importance so that allocations can be made to provide for your children and ageing parents in the event of your death.