Can you afford to take care of your parents?

Photo by Marc Steenbeke on Unsplash

This past weekend I went home for a small and intimate family gathering to celebrate my father’s 60th birthday. It was great being home after a long while, reconnecting with friends and family.

Those in attendance shared a few moving speeches to honour my father and these got me thinking. My father, much like his friends who came to celebrate him was retiring.

The question that immediately came to mind was “does he have enough money saved up to retire comfortably?” If not (and it’s a big IF!), what are the financial implications for my siblings and I?

With many parents approaching their retirement years, the reality is that they are looking to us to take care of them during their golden years. Parents in Lesotho have sacrificed saving for their retirement in order to provide better opportunities for their children. Putting money away for retirement wasn’t a priority as they struggled to put their children through school.

As a result, they face retirement with limited financial resources and no healthcare in place.  The consequence of this is that we have to take care of them financially and provide good healthcare, groceries and household expenses. The key question to ask is “Can you afford to take care of your parents?

In a recent article titled “It all starts with a budget” I emphasized the importance of preparing a budget to determine if you are living within your means or not.

The reality is that many of us have a financial obligation (which may not be negotiable) to take care of our parents. Often times this responsibility can become a burden if not approached with due skill, diligence and care.

Understanding your budget is therefore very important, because the additional cost of taking care of your parents need to be provided for. The consequence of not planning and managing this cost could see us sacrificing our own savings for retirement, further perpetuating the problem of inadequate savings in Lesotho. So what should one consider when preparing to take care of your parents?

Have frank and honest conversations

One option to consider is have an honest, but difficult conversation with your parents. Talking about personal finances is not the easiest conversation to have, because money issues have always been a sensitive topic (especially with our parents).

If we are to survive however, these conversations NEED to happen. It is important to determine how much income is available to cater for retirement, what their income needs are and how big the shortfall is.

Understanding their needs i.e. groceries, healthcare and other costs is very important. This can help you determine if you can afford the additional expenses (which at times you cannot avoid) and to plan accordingly.

Talking to your parents about their finances can also help unlock additional sources of income from farming activities, running a small business, getting a short term contract or consulting (if they are retired professionals) depending on their lifestyle.

The second difficult conversation to have is with your siblings. Like with most families, siblings have a joint responsibility to help their parents as they approach their retirement years.

The challenge however, is siblings still living at home aren’t willing to move out or contribute to the household expenses. With the high unemployment rate in the country, it is also harder for some siblings to contribute because they do not have a monthly income.

This can increase the financial burden on the siblings who can help as the financial strain increases significantly. The benefit of having honest conversations is that they help us to understand the severity of the problem and enables us to develop a plan early on.

An additional benefit is having a meeting with a qualified financial advisor to navigate what options are available.

Plan for medical expenses

With age, our parents’ health starts to deteriorate and their need for medical attention increases. With the cost of medical services on the rise (especially if not budgeted for) and some parents relying heavily on chronic medication, not having a plan can affect our monthly budget should a parent suddenly fall ill.

Recently cancer has been on the rise and most elderly people are faced with comorbidities, that is to say they suffer from more than one ailment.

The overall costs of managing these critical illness is so high that most people end up settling for public healthcare facilities where care is not according to the needs of the patient. Costs for managing cancer can go as high as LSL500,000.00 per annum and this is normally not readily available for most families when in need.

It is therefore important to have adequate savings for such emergencies, medical aid cover and/or hospitalization covers which are very important.

As a budget tool, medical aid provides families with a chance to transfer the risk of deteriorating health by paying fixed, affordable amounts to a medical aid provider.

If you do not have a plan yet, I would suggest that you consult a qualified financial advisor or medical aid consultant about the best options available.

Plan for your retirement

Taking care of your parents during their retirement years is no excuse for you to postpone or ignore your own retirement savings. The industry recommendation is to replace 75% of your pensionable salary to maintain the same quality of life during retirement.

This requires that you at least save a minimum of 15% of your income towards your retirement. This is extremely hard because our income is already stretched to its limit trying to keep up with the constantly increasing cost of living.

It is therefore key to understand the components of your budget, consider increasing your sources of income and/or cutting down your monthly expenses (I feel like we’ve cut down costs substantially already!).

The truth is, we need to talk about our personal finances well in time and plan accordingly. In my case, it seems that I may need to accommodate my parents in my financial plans and this is a reality I may not be able to avoid.

If you are in a similar situation I would suggest having that difficult conversation, putting together a plan and taking control of your finances as soon as possible.