Being everyone’s caregiver: Multigenerational family finances

multi-sized child and adult coats hang on a coat rack

More adults are taking on the role of caregiver for younger and older individuals alike. What financial actions should they consider?

More Americans than ever are playing the role of caregiver for loved ones. Today, nearly 1 in 5 Americans are caring for an aging adult.1 And in a September 2020 analysis, the Pew Research Center found that 52% of young adults were living with one or both parents—the highest percentage since the Great Depression.2

“Today, it’s not uncommon for a working couple to help support both their parents and their own younger or adult children,” says Lauree Peterson-Sakai, senior vice president, Aging Client Services, Wells Fargo. “In some cases, due to the rising costs of housing and child care, retired parents might be helping their adult children and grandchildren.”

If you find yourself supporting loved ones, and facing competing demands for your money, where should you focus? Here, Peterson-Sakai shares seven key financial actions to consider so you can continue helping loved ones without short changing your own financial future.

1. Put your own retirement needs first. Saving for retirement should remain your top priority no matter what, says Peterson-Sakai. “Your children have access to financial aid, scholarships, and jobs to pay for college,” she says. “Your parents or grandparents may qualify for community or federal financial help. But while past generations could rely on defined benefit programs, such as pensions, today the majority of the responsibility is on the individual. You can’t get a loan for retirement.”

2. Check in on your parents’ financial health. Though it might seem awkward, talk to your parents about their wishes for the future and their financial health. For example:

  • What financial assets and expenses do they have?
  • How do they plan to meet their financial obligations?
  • Do they have a plan to cover the costs of long-term care?

This conversation can help you determine how much financial support you will need to provide. This conversation can be difficult, Peterson-Sakai says, but there are resources that can help. Two she recommends:

  1. Working with a financial professional, who can suggest ways to speak with your family members and uncover the information you need
  2. The book “Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances,” by Cameron Huddleston

3. Create a budget that works for everyone. Caring for additional family members will likely increase your day-to-day expenses. It’s important that you all agree on how bills are handled so no animosity arises over time. For young adults who have moved back home, you might ask them to pay rent or contribute toward certain bills. You can use these funds to offset your costs, or set the money aside in an account so you can give it back later. Consider asking siblings to help contribute to the costs of caring for your parents/grandparents.

4. Speak to your tax advisor or accountant. If your parents/grandparents qualify as your dependents, you may be able to access certain tax relief. Your tax advisor may help you determine the criteria for qualifying as dependents.

5. Make sure your parents/grandparents have done adequate estate planning. Ask for copies of their will or trust, durable power of attorney, health care power of attorney, and advance health care directive. For more information on the documents they may need, review this list of estate planning documents.

6. Regularly revisit your budget and investment plans. Make sure you balance your financial goals with the changing needs of your children and parents/grandparents. Priorities might shift over time, such as when a child goes to college or a parent or grandparent goes into long-term care. If you need to make financial changes to meet your obligations, Peterson-Sakai says reducing contributions to your retirement investments/savings plans should be the last resort. Instead, try to reduce ongoing expenses by cutting back on vacations, driving your cars a bit longer before replacing them, or cutting back on other extras such as dining out.

7. Review your insurance coverage. Insurance is important when you have two or more generations depending on you. Make sure you have enough life insurance in case something happens to you. Life insurance can pay off your mortgage and other debt and help cover the future living expenses of your dependents. And don’t forget disability insurance: If you don’t have access to disability insurance through your employer, investigate a personal policy to make sure you’re covered for the unexpected.

1 “Caregiving in the U.S. 2020,” AARP and the National Alliance for Caregiving, 2020.
2 “A majority of young adults in the U.S. live with their parents for the first time since the Great Depression,” Pew Research Center, September 4, 2020.

Wells Fargo & Company and its affiliates do not provide legal or tax advice. Wells Fargo Advisors is not a legal or tax advisor. Please consult your legal advisors to determine how this information may apply to your own situations. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.

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