In our newsletter last month, you may have read about the financial challenges of being a member of the sandwich generation. That is to say you are “sandwiched” between your children and elderly parents – both of who you have an element of financial responsibility for.
In that article we looked at your parents’ finances and the future plans you may have for your children, and how these could affect your own financial planning. This will especially be the case if you are going to be moving between the UK and Australia. As a result, it will be crucial for you to give careful consideration to your financial plan, in terms of your own savings, investments, and retirement strategies.
In this follow-up piece, you can read more about how you may need to adjust and adapt your own plans to account for the future challenges you may face.
1. Forming a financial plan while spinning several plates at once
Spending time in two different countries, deciding where you want to retire, planning for your own financial future, and giving financial support to your elderly relatives or children (and potentially grandchildren) are all complicated issues on their own.
So, if you consider that you may be forced to confront two or more of them at the same time, it’s easy to see how such a scenario could appear overwhelming.
Having a plan in place – even if it’s just an outline initially – means you are not leaving anything to chance.
Once your plan is in place, you should look to review it at least annually, as well as at times when there are major changes in your personal circumstances.
2. Securing your future through effective retirement planning
While you may have financial obligations towards other members of your family, your priority perhaps ought to be to plan for your own future financial security.
The cornerstone of your planning will be accruing sufficient retirement funds to provide yourself with a comfortable lifestyle once you stop working.
Bear in mind that your accrued fund, and other assets, may need to provide you with retirement income for 20 years or more.
At this stage, you may not have an accurate idea of what your income requirements will be. While it’s tempting to assume your outgoings will reduce after you retire, this may not necessarily be the case.
One helpful strategy is to increase your pension contributions as much as possible. This could include accelerating contributions after a career break looking after elderly relatives or parental leave.
3. Protecting yourself and your income
When you have several dependents of different generations, and you are anticipating some financial stress when it comes to looking after them, you will want to protect yourself from anything that could make this more difficult.
One obvious example is you losing your job or being ill or injured and unable to work. In these circumstances, your own financial stability could be threatened, and a break in your earnings potential could endanger your future financial security. This is especially the case if you are the main breadwinner in your household.
Recent Scottish Widows research revealed that 42% of people believe their family would struggle in the event of them being unable to work. Taking out financial protection to shield your earnings in the event of serious illness or incapacity may not only put your mind at rest, but will also provide valuable peace of mind for your dependents.
It’s important to be aware that protection arrangements aren’t always transferrable, so any move between countries may necessitate new arrangements.
A further important step when it comes to protecting your lifestyle, and that of your financial dependents, is to ensure that you have a suitable emergency fund in place to cover your family costs in the event of an unexpected event threatening to blow you off course.
As a rough rule of thumb, you may want to ensure that this contains between three and six months’ net household income.
4. Facing up to potential care needs and costs
If you’re caring for elderly parents both physically and financially, you may need to look into care provisions, regardless of whether you are in the UK or Australia.
In the UK, The King’s Fund has confirmed that the number of people who need social care has risen in recent years, and that most people, or their family, will be required to pay for all or a portion of their care costs.
Similarly, the Australian Bureau of Statistics has published data revealing that more than half of older Australians have a disability, and that 39.8% of older Australians living at home need some assistance with everyday activities.
Given these statistics, it is advisable for you to prepare for any potential care costs you may face on behalf of your parents, and to factor these into your long-term financial planning.
Clearly, your parents’ own financial means will have an impact on your planning. Additionally, it’s worth realising that care provision does not necessarily mean a care home. Many care requirements for the elderly can be met in their own home, and with minimal financial upheaval.
5. Planning your legacy
When it comes to forming a financial plan while keeping multiple generations’ needs in mind, it is understandable that legacy issues are likely to feature strongly.
Clearly, such legacy planning will work on two levels.
You may be working on the assumption that you’ll receive an inheritance from your parents. But Canada Life research suggests that more than half of UK adults who have received an inheritance in the last five years did not discuss the value of it with the benefactor beforehand.
Facing up to your own mortality is never easy, especially when it comes to sharing this with your children. So, it’s likely that conversations about legacy planning with your parents could prove to be awkward.
However, having such conversations can help put your mind at rest that their estate plan is in order, and that your potential role as an executor should not be too onerous.
On the other side of the coin, part of your financial plan will likely be considering your own legacy.
An essential starting point is to ensure you have a will in place, meaning that your wealth passes to your intended beneficiaries.
To avoid potential legal delays, and to keep you legacy planning up to date, it can help to have separate wills for Australian and UK assets, and to update these as necessary when the value of your assets changes.
Additionally, it is important that you are cognisant of Inheritance Tax (IHT), and the different tax treatment of your legacy between the UK and Australia.
Get in touch
At bdhSterling, we have a wealth of experience in helping clients with their legacy financial planning, and other issues that may arise when you’re part of the sandwich generation.
Get in touch to find out how we can help you.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, will writing, or tax planning.
