Tips for the Sandwich Generation: Financial Boundaries and Collaboration between Adult Children and Aging Parents

As adult children, we often find ourselves navigating the complex world of our aging parents' finances. It can be a beautiful experience of sharing responsibility and celebrating a lifetime of trust, but it can also be easy to cross lines, hurt feelings or overstep engagement. This goes both ways, as aging parents often find themselves wondering how much autonomy to relinquish at various times, and we also see their strong desire to make their adult children’s lives better with financial gifts. In both cases, we know that establishing clear boundaries and fostering collaboration are crucial for maintaining financial health and family harmony. This blog post explores key areas where boundaries are necessary as well as where collaboration can be beneficial, all from the perspective of an adult child.

Boundaries for Financial Independence

For Your Aging Parents:

1. Spending Limits: Encourage your parents to set clear boundaries on discretionary spending to preserve their retirement savings. Although they deserve to thrive in their retirement, we all need to allocate a specific amount for non-essential purchases each month, like a certain amount for entertainment or hobbies.

2. Gift-Giving: At Mana, we find that this is one of the most important areas to set boundaries. Establishing limits on financial gifts to protect your parents’ long-term financial stability is key. But sometimes more importantly, setting a good example for their grandchildren and the money values you want to instill in them can be disrupted by gratuitous giving. If your parents habitually give large sums to grandchildren, propose a yearly gift budget, such as $X per grandchild for birthdays and holidays combined.

3. Investment Decisions: Respect their autonomy in investment choices, while encouraging them to consult with professionals when needed. If your father wants to invest heavily in a risky startup, it could be okay to suggest he limit such investments to a small percentage of his portfolio, but when these conversations turn emotional, it’s usually better to bring in a third party mediator.

For You as an Adult Child:

1. Financial Assistance: It may be that you are in a better financial situation than your parents. In this case, you will need to define limits on the financial support you can provide to them to protect your own financial future. Together, you can decide on a maximum monthly amount you can contribute towards their expenses, perhaps focusing on necessities or high-importance items like groceries or medical co-pays. You can build things like vacation costs into your own travel budget for the year to ensure there is adequate surplus for covering their expenses (this budgeting advice certainly works both ways for parents and their adult children, depending on who is giving and receiving money).

2. Time Commitment: Set boundaries on the logistical time and emotional toll you spend on managing your parents' finances. It’s important to maintain a healthy balance and recognize when you need a break to avoid bad feelings or burnout. If you allocate specific times for financial tasks, like every other Saturday morning for bill paying and account reviews, you may find them to be more manageable and easily planned for.

3. Personal Financial Privacy: Maintain separate accounts and financial information unless necessary for caregiving. Keep your retirement accounts and investments separate, sharing information only about joint accounts or when power of attorney is needed.

Areas for Collaboration

1. Online Account Management

• Assist your parents in setting up and managing online banking and investment accounts.

• Implement two-factor authentication and strong passwords for security.

• Regularly review account activity together to catch any irregularities.

Idea: Set up a monthly "tech session" where you help your parents log into their accounts, check balances, and pay bills online. We’ve written about the importance of online security and digital estate planning in the past. This could be done remotely if your parents are comfortable with video calls and screen sharing. Ask your parents if you can meet or engage more with their financial team, including planners and lawyers, and familiarize yourself with their suite of financial accounts and services.

2. Progressive Financial Management Plan

Create a tiered plan for increasing your involvement as your parents age:

• Stage 1: Parents manage finances independently with occasional check-ins.

• Stage 2: You assist, in conjunction with a professional, with complex tasks like tax preparation or investment rebalancing.

• Stage 3: You (or a trusted professional) take on bill paying and day-to-day financial management.

• Stage 4: Consider power of attorney for full financial management if necessary.

Idea: Have a thoughtful discussion with your family to define these stages, brainstorming together about what kinds of cognitive and physical symptoms would necessitate moving from one stage to the next. Start by offering to help with annual tasks like tax filing, then gradually take on more regular duties like monthly budget reviews as needed. Engage both parties’ financial planning teams about your decisions so they can prepare as needed. If your time is limited, know that there are professionals who you can hire to do these important tasks. For example, a daily money manager can provide professional financial services for older adults.

3. Estate Planning (we really can’t emphasize this one enough!)

• Collaborate on creating or updating wills, trusts, and healthcare directives.

• Discuss and document wishes for inheritance and end-of-life care.

Idea: Schedule a family meeting to review your parents' existing will and discuss any necessary updates, such as changes in asset distribution or healthcare preferences. You can check out our previous blog posts on this topic for more inspiration about how to have these tough conversations.

4. Insurance Review

• Jointly review health, life, and long-term care insurance policies.

• Discuss options for filling coverage gaps or updating beneficiaries.

Idea: Annually review your parents' Medicare coverage and supplement plans to ensure they have adequate coverage for their current health needs. Ask for help from your financial planning teams if needed.

5. Budgeting and Expense Tracking (not for everyone, but if your finances are closely tied together, this section is important to consider)

• Work together to create a realistic budget that accounts for current and future needs.

• Use budgeting apps or spreadsheets that can be shared and updated by both parties.

Idea: Set up a shared Google Sheet to track your parents' monthly expenses, categorizing them to identify areas where costs could be reduced.

Strategies for Developing Healthy Financial Boundaries

Ultimately, the boundaries you set with your family should be your own. You’ll need to have a series of ongoing discussions to maintain agreement and harmony how things progress. Here are a final few tips for setting these boundaries thoughtfully:

1. Open Communication: Foster regular, honest discussions about financial situations and concerns. Schedule a regular cadence of "financial check-in" calls with your parents to discuss any money matters or concerns.

2. Professional Mediation: Consider involving a neutral financial advisor to help navigate difficult conversations. We, of course, are in favor of hiring a financial planner for a family session to discuss long-term care planning and how it affects both generations.

3. Clear Documentation: Put financial agreements and plans in writing to avoid misunderstandings. You can start by drafting a simple agreement outlining your role in managing your parents' finances, including specific tasks and time commitments.

4. Respect Each Other's Privacy: Use secure methods for sharing financial information and respect each other's right to privacy. For our more tech-savvy families, you can even consider using a password-protected and/or fully encrypted file-sharing service to exchange sensitive financial documents instead of email.

5. Education: Encourage ongoing financial literacy for you and your parents, to promote informed decision-making. Create a habit of sharing relevant articles or attending financial workshops together to stay informed about retirement planning and elder care costs.

6. Flexibility: Be prepared to adjust boundaries and plans as circumstances change. If a parent is diagnosed with a chronic illness, be ready to reassess financial plans and your level of involvement.

7. Self-Care: Remember to prioritize your own financial well-being alongside family obligations. Ensure that you're maintaining your own health, wealth, retirement contributions and savings, even as you assist your parents financially.

By establishing clear boundaries and areas of collaboration, you can navigate the complex financial landscape with your aging parents more effectively. Remember, the ultimate goal is to maintain as much financial health and independence for both generations while providing necessary support and care.

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Madison Elliott is a UX Researcher at Google. Madison consults on data engineering and usability at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. Madison brings her combined background in cognitive science, computer science and clinical psychology with her professional UX design and engineering experience to optimize workflows at Mana FLD and improve people’s lives.