Caregiver to a loved one? Here’s how to help ensure your finances don’t suffer as a result
There are around 43 million Americans acting as caregivers to their loved ones right now – as many as 75% of whom are female1. Often, this means looking after children. But women are far more likely than men to take on the job of caring for an elderly or infirm relative, friend or neighborneighbour too. What’s more, as the population continues to age, the need to provide this kind of support is only set to rise.
Being the nation’s primary caregivers is more than just a drain on women’s time and emotions. It also carries a financial toll, with many either reducing their working hours or quitting their job entirely in order to accommodate caregiving responsibilities. In fact, some estimates suggest that the total lifetime cost of unpaid caregiving for an individual female in terms of lost wages and Social Security benefits is as much as $324,044.
Women who do manage to juggle a career with looking after a loved one are also more likely to be employed in lower paying service jobs, one of the sectors hit hardest by the COVID-19 pandemic. And this perfect storm of reduced hours, lower income and potentially greater job insecurity can naturally influence their financial planning.
However, if you’re a female caregiver, there are some simple ways to manage your money more effectively and ensure your decision to do the right thing for your loved one(s) doesn’t have major financial repercussions for you – now or in the future.
- Review your current investments and asset allocation. With interest rates at historic lows, stocks can offer you better returns than money in the bank. In fact, checking accounts are currently paying interest at a lower rate than inflation, which is around 2.2%. Ideally, you need your savings to outperform inflation to increase your future purchasing power. If your financial situation allows, consider moving a portion of the funds in your checking or low-yield savings account to a higher risk but potentially higher reward investment.
- Invest in your IRA. If you’re not working but your spouse is, you can continue to invest in an IRA. In fact, you can save $6,000 per year or $7,000 if you’re aged 50 or over. If you’re working and enrolled in an employer scheme, always try to contribute enough to take advantage of the company match. A good rule of thumb is to save at least 10 to 15% of your income for your eventual retirement.
- Develop a budget. Separate essential costs like rent, loans, groceries and medicines from more discretionary spending on entertainment, personal grooming and eating out. Then set yourself a monthly target for discretionary items and stick to it, keeping costs down without removing all the fun from life. A good place to start is by cutting out expenses on stuff you’re not currently using properly, like a gym membership or subscriptions. Invest any money you ‘find’ by doing so into savings.
- Revisit your insurance policies. You may discover you don’t need all the insurance you had in the past due to a change in your circumstances, meaning you can streamline your plans and reduce your premiums. Alternatively, you may need greater coverage if you have taken on more financial obligations. Either way, it’s important to ensure you have the right plans for your situation, so make time to review this at least once a year.
- Be smart about tax and debt. It’s not what you make but what you keep that matters, so always try to capitalize on any tax freetax-free investment options. Review your estate plans too as there may be ways to reduce or eliminate eventual estate or inheritance taxes. Similarly, make sure you focus debt repayments on loans carrying the highest rate of interest, particularly credit cards. This can help prevent your monthly costs spiralling out of control.
When it comes to all the above, it’s important to speak to a qualified financial advisor. Whatever your caregiving responsibilities, they can help ensure you’re making the most of any opportunities to bolster your finances, maximize your investments and reduce your tax burden right now, while also providing advice on how to plan effectively for the future.
Even more importantly, knowing your finances are in order leaves you free to focus your time and energy on caring for your loved one(s) without having to worry about what it could mean for your own financial wellbeing further down the line.
Equitable is the brand name of the retirement and protection subsidiaries of Equitable Holdings, Inc., including Equitable Financial Life Insurance Company(Equitable Financial) (NY, NY), Equitable Financial Life Insurance Company of America (Equitable America), an AZ stock company with main administrative headquarters in Jersey City, NJ, and Equitable Distributors, LLC. Equitable Advisors is the brand name of Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI and TN). All group insurance products are issued either by Equitable Financial or Equitable America, which have sole responsibility for their respective insurance and backed solely by their claims-paying obligations. Some products are not available in all states.