If you’re one of the Sandwich Generation who provides for your children and your elderly parents then taking care of your own finances might seem like an impossible task.

There are lots of steps you can take to ensure you maximise your chances of a financially secure future.

GET YOUR PRIORITIES STRAIGHT

Taking care of your children’s and parents’ finances can be a real strain.

The cost of university education has soared and children are increasingly reliant on their parents to help them get a foot on the property ladder. On top of this, rising longevity means the elderly face huge care costs which they may not be able to meet on their own.

It’s no surprise that people in the Sandwich Generation aren’t able to fully focus on their own personal finances.

Patrick Connolly, head of communications at financial planning firm Chase de Vere, says financially-stretched people have to make compromises between supporting their loved ones and managing their own finances.

The situation is more complicated when it comes to elderly parents, especially if they need payments to maintain their quality of life.

Charlie Musson, spokesperson for investment platform AJ Bell Youinvest, says: ‘Choosing between your children and parents for financial support is not a position anyone wants to be put in. It will require a fine balancing act and will probably boil down to whoever you think has the greatest need.’

START PLANNING EARLY

It’s better to start planning your finances as soon as possible than wait until issues arise.

This means not taking on unnecessary debts, building cash savings and paying sufficient amounts into a pension scheme.

If you’ve already started sorting out your own finances when your children are born, you’ll be in a much better position to help your children, and your parents, if the need arises.

‘The key when saving for children is to start as early as possible,’ says Musson. ‘This may be easier said than done when your outgoings have just ramped up significantly following the birth of a child, but saving little and often can have a big impact over the long term.’

If you start saving £100 a month immediately when a child is born and invest it in a Stocks & Shares Junior ISA, it could be worth just over £35,000 on their 18th birthday, assuming 5% annual investment growth. It’s much less daunting than trying to find a huge lump sum when they reach adulthood.

‘This will give them a great springboard in life and can help them find their financial independence as quickly as possible, which will be vital for the Sandwich Generation who may then have to provide financial support to their parents too,’ adds Musson.

Careful planning is also essential to helping financially dependent parents. If your parents have no cash but are living in a mortgage-free property, equity release could be an option. If your parents have no assets at all, they might be entitled to state benefits.

MAKE SACRIFICES

You can ensure you don’t neglect your own financial security by making some small sacrifices, such as reducing how much you spend on eating out and holidays. This could help to free up some spare cash to squirrel away for when it is needed.

Over 20 years, small cutbacks could make a huge positive impact to your pension.

Liz Alley, head of financial planning operations at Brewin Dolphin, says cutting out a £2.50 coffee every day and redirecting that cash into your savings could add almost £28,000 to your pension over the long term. That assumes investment growth of 4% and taking into account basic rate tax relief of 20%.

‘It may seem like there is a long way still to go, but 45 to 54 year-olds are approaching the final leg of their journey to retirement. With only 180 monthly paydays left (for a 50 year-old planning to retire at age 65) there is no margin for complacency,’ she warns.

An alternative to a pension is an ISA. Although ISAs don’t provide any upfront tax relief, money can be withdrawn tax-free and whenever it is needed, which is useful for short-term expenditures.

Most investment platforms have a regular investment
service which lets you invest small amounts of money each month into an ISA or even a SIPP (self-invested personal pension).

CAN’T I JUST RELY ON MY INHERITANCE?

Relying on an inheritance, such as the money you’d get from selling your parents’ house when they die, to secure a comfortable financial future isn’t a sound financial planning strategy.

Thanks to increasing longevity, your elderly parents might need their retirement funds and assets to last more than 30 years. If they need to pay for care as well, the size of their estate on death could be reduced dramatically.

You also have to consider that many parents may not even have significant wealth in the first place. (EP)

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