How Sandwich Generation mothers-caring for kids as well as parents-can plan their finances.
Many women are in a position that can best be described as a ‘sandwich’. They are caught between looking after their kids’ and parents’ physical and emotional needs, besides the financial, medical and legal requirements. They are the Sandwich Generation. Or Gen S. Here are some important issue&they should keep in mind.
Secure your own future
Focus on retirement: You have to keep aside a retirement kitty and not touch it. Equity is a good tool to realise long-term goals since it offers high returns in the long run. Start saving for your retirement as soon as you start working and supplement it with pension plans, EPF, PPF and NPS investments.
Buy insurance: Since you are earning and have dependents, be adequately insured for life. Buy an online term plan, which should be 7-10 times your annual income. Buy a family floater health plan, to cover your spouse and kids. Buy a separate mediclaim plan for parents and inlaws. Get an accident disability plan.
Build an emergency corpus: For eventualities that require immediate access to funds, have an emergency corpus. If you have a medical buffer for parents, keep a contingency corpus equal to 3-6 months’ of your expenses. If you don’t have a medical corpus, keep a bigger fund. Seek out tax breaks: Since Sandwiches shoulder an additional financial burden, they need to increase savings. One way is to avail of all tax exemptions and deductions. Seek the help of dependents to maximize tax savings
Invest more in equity: Since most Gen
S-ers have long-term goals, utilise the potential of equity as it is the only asset class that can beat inflation.
Take care of parents
Buy health cover, keep medical buffer:
Given the 15-20% rise in healthcare inflation, medical costs can eat into savings. Ensure your parents are covered before they retire. Avail tax deduction for paying the premium for your parents’ plan.
Manage post-retirement funds: Retirees
prefer debt when it comes to parking their savings. But the corpus needs to grow at a rate to beat inflation. Put 15-20 % of their corpus in equities, through mutual funds. The debt component can be invested in the Senior Citizen Savings Scheme and Post Office Monthly Income Schemes.
Handle their paperwork: Most senior
citizens prefer to manage their own funds and document. Offer help where needed, without forcing your opinions on them.
Help them make a will: it is crucial that the subject is dealt with since it can lead to a lot of legal hassles later on and undue complications in the transfer of assets.
Plan for kids
Start saving early in equity: The best
way to ensure you reach children-related goals without risking your own goals is to start investing in equity as early as possible. The best option of course is investing in mutual funds through SIPs.
Let them take education loans: if you
run short of funds, opt for education loans. They help inculcate financial discipline and responsibility in the child since he has to repay the loan on getting a job.
Let kids fund their weddings, partially:
With the financial strain of caring for kids and parents clearly showing on Sandwichers, it is a prudent move that will make children handle their own finances more conscientiously while relieving the parents of an additional burden.
Teach them financial planning: This one step will go a long way in securing your child’s future and ensuring that he doesn’t lean on you for financial assistance as an adult. Start early with the training, when the child is five or six years old. Continue this education till the child is 16 or 18 years old.
By ET CONTRIBUTORS | December 27, 2020