There are of course numerous reasons why this plays out. People are living longer than they used to, breadwinners pass away, a parent or parents lose their jobs, unexpected and expensive medical issues crop up or there are simply too many mouths to feed. Whatever the case and despite the best intentions, children usually end up assisting their parents financially because of a lack of proper financial planning.
Unfortunately, children inevitably end up being approached by their parents during a time in their lives when they can least afford it i.e. while they are trying to support their own families and service a bond and other costs. People who fall into this bracket are commonly referred to as the ‘sandwich generation’- those who are caught between their own financial needs and the financial needs of their parents.
Most parents don’t want to become a financial burden to their children later on in life. Indeed, for many, it’s stressful and embarrassing to have to approach their children for assistance with housing and medical bills. Needless to say it can very difficult for the children involved too. To prevent this from happening to your child, its best to take action sooner rather than later and look after your own financial goals first.
Adequate retirement savings plays a key role in this regard says Ronald King, head of technical support at PSG Wealth. He explains that while you should of course try to give your child the best opportunities you can, it’s also important to rein in spending at the expense of retirement savings.
Placing the matter in context, King says that for every R4 000 needed per month in retirement, R1m is needed in capital at today’s monetary value. He adds that a good medical aid scheme will entail another R1 500 000 in capital to fund comprehensive cover for two until the age of 95. Food for thought indeed.
Adds King: “Investing in your retirement first will reap richer rewards for your child’s future than if you spend that same money on coaches and extramural activities. Over and above your retirement savings, you can still provide for these extras if you can afford to, but remember that next to a good education, the most important gift you can give to your child is your own financial independence.”
Another way to try and offset the possibility of a sandwich generation scenario is to try and bring down your property costs. If you have a bond on your property, consider paying more into it now which will not only shorten the term of your bond but save you money in the long run too.
In addition to addressing your long term financial needs, it’s important to discuss ways in which your child can help offset costs too. Chat to your child about what they want to study and how they could perhaps contribute to their costs by finding a part-time job. In a similar vein, should your child remain at home or return home during their studies, make it clear that they need to contribute either by way of helping around the house and/or paying rent.
In a nutshell, adequate planning well ahead of time can make all the difference to being a burden on your children later on in life or enjoying the time you have with them to the fullest.