National Pension System

5 Financial planning strategies for the “Sandwich Generation”

Lately, sandwich generation is struggling with the dual responsibility of caring an elderly parent and also supporting children financially in this rapidly changing landscape. Dinesh Rohira, Founder and CEO, said, “The overwhelming wary of rising living standard, especially in urban geographies, puts pressure on this generation to navigate the needs of children and aging parents. This regime seeks a holistic planning for individual in this generation to navigate through both short-term and long-term obligations.”

It becomes essential for individual to identify the resources available with them, and accordingly plan an insightful objectives of life. Rohira added, “This generation should make use of every single opportunity offered by way of tax exemption through financial products and upgrade knowledge of investment instruments/policies time-to-time.”

Five financial planning strategies for sandwich generation to save and invest money wisely

Set financial priorities for the family

Taking a responsibility is likely to be a challenging if one fails to priorities the essential requirements, family goals and their monthly budget. Rohira explained, “An individual in this generation is loaded with so many obligations with limited budget that making a short-term and long-term plan is critical to set a priority and need to stick to it on regular basis.”

Ensure adequate insurance coverage for life and health of a family

Patanjali Somayaji, CEO and Co-Founder, the Walnut App said, “With increase in medical costs, it is important that elderly parents should have health insurance. Even though premium for senior citizens is on the higher side, it is worth it. Similarly, a family floater health insurance should be availed of to include wife and children.” A term life insurance policy is also a must, so that dependants do not have financial problems later due to loss of life or other unforeseen circumstances.

Ideal investment portfolio

Mostly, 30 to 60 is an age of sandwich generation person in the family and several financial goals are to be achieved. This is the time your risk appetite starts to reduce, but at the same time you require a good return as you have your children’s education lined up in the future, own retirement planning and building a corpus for elderly parents. Abhinav Angirish, Founder, recommended, “Your major part of the portfolio should be in stocks, followed by a high proportion in bonds and the lowest in real estate. This portfolio will keep on becoming defensive as your age grows. Although this is the ideal recommended portfolio structure but due diligence must be performed while constructing it.”

Prepare a savings budget instead of an expense budget

Creating a savings budget is hugely beneficial for this sandwich generation. Amar Pandit, CFA, Founder of financial advisory firm, said, “Most people spend first and then invest of what is left. This way of managing cash flows leads to unnecessary expenditure and eventually lesser savings. People should first set aside a portion of their income as savings towards family goals and then spend the balance amount.” Following a savings first budget will ensure that over a period one builds a sizeable corpus through steady investments and streamlines monthly expenses.

Involve the entire family in financial discussions

In most families, only head of the family or his elder son takes financial decisions and is aware about investments / insurance of the family members. Somayaji said, “Let parents know what steps you’re taking to take care of their financial needs at old age. Likewise, it is important to discuss finances / investment decisions with wife and children once they’re older, so they also understand the value of money, and how you’re planning for their future so they have realistic expectations.”

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