How Caregiving Affects Finances
Updated on Nov 02 2018
Family caregiving can be emotionally draining as well as expensive. According to a recent survey, nearly 21 percent of caregivers have have borrowed money to provide care, and even more are struggling to save for their own futures.
The financial and personal impact caregiving can have on families can be severe. While the gender bias is changing, it’s still largely women who take on the role of caregiver for family members, whether for their children, aging parents or a disabled family member. For this reason, including caregiving in your financial planning is important.
The Financial Toll of Caregiving
According to the Family Caregiver Alliance National Center on Caregiving and a recent ‘True Cost of Caregiving’ survey by Northwestern Mutual:
- Approximately 43.5 million caregivers have provided unpaid care to an adult or child in th last 12 months.
- About 34.2 million Americans have provided unpaid care to an adult age 50 or older in the last 12 months.
- 85 percent of caregivers provide care for a relative, with 49 percent caring for a parent or a parent-in-law.
- One in 10 caregivers provide for a spouse.
- Caregivers spend 24.4 hours per week helping with activities like bathing, dressing, housework and managing finances.
- 32 percent of caregivers provide at least 21 hours of care a week, on average providing 62.2 hours of care weekly.
The reality is that many Americans have to leave the workforce to care for a child, a disabled family member, an injured or ailing spouse or an aging parent. The caregiver role can be disruptive to a career, and that has major implications for caregivers’ finances — predominantly women’s finances since they are generally the family caregiver. Major disruptions include:
- A loss of income
- Loss of career momentum
- Financial hit to retirement accounts
Here are some tips to manage your finances as a caregiver:
1. Remember that your financial stability comes first.
The number one rule in caregiving is to take care of yourself first. This also applies to your finances. Create a budget and spending plan and stick to it. It’s important to look for ways to cut your expenses and boost your savings in every way possible.
2. Don’t take on unmanageable debt for yourself.
Don’t put expenses for a loved one on your own credit card. It’s easy for interest charges and debt to spiral out of control; especially if you no longer have the income you had before caregiving. Research community or governement resources to help lower caregiving expenses. Your local Area Agency on Aging or other services in your area might be able to help.
3. Consider alternative care options before leaving your work.
Before leaving your full-time position with benefits, explore other care options like possibly an in-home caregiver or adult day care. If you have to, explore ways of working reduced or part-time hours. Just remember that benefits are expensive so do everything you can to maintain your benefits.
4. Make sure you have emergency funds.
Many Americans don’t have enough savings for emergency funds, which is a huge problem. Being prepared in case of an emergency, whether medical or family, or the inability to work for months at a time requires financial reserves. Make sure to replenish your emergency fund and remember your own financial well-being.
5. Prioritize your retirement savings and future well-being.
Keep actively contributing to your retirement accounts, even if it’s just a small amount each month into your 401k or IRA. If you dipped into your retirement account to cover caregiving expenses, rebuild your funds — even if it’s slowly. Make sure to take advantage of the vesting contribution from your employer and other benefits before cutting hours or leaving a job, and set up an IRA to continue to contribute. Purchase long-term care insurance for yourself and make sure you have all your legal paperwork and financial ducks in a row.
6. Get help from friends, family and community resources.
Last, but certainly not least — Make sure to enlist help. Caregiver burnout is common as caregiving can take a toll on many aspects of your life. Make sure to get help from friends, family and community resources and prepare for your own aging and stability. Also, an expert financial advisor can help you organize your finances to help give you peace of mind.
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