03/08/2012 05:04 pm ET Updated May 08, 2012

Financial Advice: Balancing the Needs of Three Generations

By Gabby Phillips, Associate Director of Content, Women & Co.

As a consequence of an aging population, more working Americans are finding themselves faced with saving for retirement while sandwiched between financial obligations to children and to parents and older relatives. As CFOs of their households, women are increasingly responsible for juggling competing financial needs of their families.

Financial Needs of Parents
Retirement savings have taken a significant hit during the recession and aren't bouncing back quickly. Add to that declining home values and increasing healthcare costs and the result is that many of our parents and other relatives may need financial help.

If you believe your parents or other relatives may need assistance, have a frank conversation to determine:

1. Their current assets and income.

2. Their current spending habits (i.e., rent or mortgage payments, fees incurred when accessing retirement accounts, etc.).

3. The percentage of their assets that are liquid.

4. How they pay for their medical and care-giving costs (Medicare, long-term care insurance, etc.).

5. Whether they have a surplus or a shortfall when it comes to their cash flow from retirement accounts, Social Security, pensions, investment properties and other investments.

To some extent, our finances are tied to feelings of independence and our parents and relatives may be defensive when it comes to speaking about money. Raising the topic can be difficult, but it can be done gracefully. To start a conversation, consider telling an anecdote about a person you know in common, a news article found in the daily paper, or share how your own retirement accounts have been impacted. Let them know that you want to make sure they are taken care of and want to understand any concerns they may have. Once you have this information, you should be able to assess if you need to supplement your parents or relative's income and can plan how best to do so.

Financing the Education of Children

The cost of higher education continues to rise, and for many in the sandwich generation, paying for school is top-of-mind. Luckily, there are a number of options when it comes to saving for colleges, including scholarships and financial aid packages. Many websites offer access to applications and a breakdown of what is covered in various aid packages, such as:

• Free Application for Federal Student Aid (FAFSA)

Federal Student Financial Aid


In addition there are a number of education savings plans that you many wan to consider. Speak to your financial professional to learn about these options and the implications they may have on your other financial goals.

In these financial times, there is an opportunity to teach your children the importance of saving and involve them in planning for their education expenses. Older children often receive money from jobs, special occasions, or an allowance. Talk to your child about putting aside a portion of the money for their education. Being an active participant will help them learn the principals of savings that they can carry through their lives.

Retirement Planning for Yourself

Despite the distractions of the current economic environment, don't lose sight of your financial future. While financial challenges may crop up and tempt you to lower your retirement contributions or stop them completely to free up necessary cash -- doing so may be a costly mistake.

Here are a few things may want to talk to your financial advisors about to help you balance the unexpected with your retirement plan.

1. How to maintain an emergency account? It's recommended that we all put aside three to six months' worth of living expenses to cover emergencies. An emergency account can help you in case of job loss, and it also can help you pay for unexpected household needs or short-term immediate needs of family members.

2. How to plan your long-term care strategy? Healthy, active, and independent -- these are adjectives you might use to describe yourself and your family members. But someday you may need to depend on someone else for care, or someone may unexpectedly need to depend on you.

Medicare may offer limited coverage in such cases, but it may make sense to have long-term care insurance, which covers costs typically not paid by health care or Medicare, such as nursing home care. Speak with your financial professional and an insurance agent to investigate how long-term care insurance may fit in your overall retirement plan.

3. What is your life and disability insurance coverage? Speak to your agent about regularly reviewing your insurance coverage based on your changing needs. Your life and disability coverage generally should replace enough of your income so that your family's current and future needs are met--including everyday living expenses, short- and long-term debts, education for your children, and retirement income for your spouse.

4. How to view your total financial picture? Knowing your day-to-day expenses and how much you save and documenting them may help you see where you can draw money from in an emergency.

By speaking with your financial professional, you'll hopefully be better positioned to balance the needs of all the generations that make up your family.

Gabby Phillips, Associate Director of Content, Women & Co.

Gabby joined Women & Co. in May, 2009. Today, she oversees the development and distribution of all content and commentary for Women & Co. She is constantly searching for topics, content and contributors that are important, interesting and relevant to you, so Women & Co. becomes your go-to source for everything you want to know about personal finance. Gabby holds a B.A. from Colgate University, and brings experience to her role at Women & Co. from financial services companies such as Sanford C. Bernstein & Co., Merrill Lynch, and Citi.