First-time Caregivers: 3 Tips for Saving Money
05 Aug 2017
Here’s the unfortunate reality of being an American today:
Everything has become so expensive that it has become so hard to manage our own finances. At this point, we can all use helpful strategies and tips for saving money for the future.
On top of that, a big number of baby boomers (35 million) still have no savings despite being a few short years away from retirement.
As we all know by now, retirement is not cheap. Long term care needs, for example, could surprise you with a $90,000 bill for just a year at a nursing home. What makes matters more alarming is that men and women typically need more than two years of care.
Without proper coverage and a good financial plan, baby boomers resort to one other solution: their family members.
Family caregivers do more than just chores and grocery shopping. If you ask experienced caregivers, you will find out that the responsibility involves physical demands, emotional stress, and financial strain. It requires a great deal from a person, and first-time family caregivers need to know what they are getting themselves into before taking the plunge.
Financial Checklist for First-time Caregivers
In our last post, we discussed three strategies that caregivers can use to prepare for retirement. Today, let’s discuss three tips that will help first-time caregivers save money now.
Learn about the Cash Benefit Option
Many baby boomers are equipped with long term care insurance. However, not everyone thought to include the cash benefit feature in their plans.
What does this have to do with family caregivers? You may ask.
This rider allows policyholders more flexibility when it comes to their benefits. More importantly, this allows them to use the money from their policy how they want to. This means that policyholders with this feature can use their benefits to pay family caregivers.
As many family caregivers end up cutting back on work hours or even quitting their jobs, this provides a good way to replace the finances they lose on out-of-pocket costs.
Download this e-book about long term care insurance by ALTCP.org to learn more about how the policies work.
Secure Financial Stability
A 2016 AARP report points that family caregivers typically spend $6,954 a year on out-of-pocket costs related to caregiving. This amount is nearly 20% of their annual income!
However, it gets worse: long-distance caregivers spend $11,923 on caregiving-related expenses.
As you can tell, this does not leave much room for financial flexibility. Also, as the care demands continue to take its toll on their well-being, family caregivers may end up needing the same care they are providing their loved ones.
The most effective strategy for this situation is this: plan for health care and long term care as early as possible.
Often, people already have coverage for health care. The issue is that they do not see the urgency when it comes to finding coverage for long term care.
This is why family caregivers are advised to secure coverage for long term care as early as they can. This way, they get to secure coverage, protect their assets and savings, and even save more money in the long run.
Keep Contributing to Retirement Accounts
This advice may already be a staple on posts featuring tips to save money.
It is often too easy to dip into retirement accounts when the costs of caregiving get too much. However, first-time family caregivers must remember that their retirement is also a priority.
Even if it is just a small amount, caregivers must dedicate a portion to their retirement savings regularly. Keep contributing to IRAs and 401(k) accounts. If somewhere along the way, they end up taking money from these accounts to pay for caregiving costs, then they need to make it a point to rebuild these funds.
Additionally, we would also like to point out the importance of creating and replenishing an emergency fund. This may help family caregivers from taking money from their retirement accounts.
Recognize When You Need Help
Yes, providing care to a loved one is a rewarding and noble responsibility to take on, but it can be too much.
When this happens, first-time family caregivers must remember that it is okay to ask for help. Talk to family members about sharing the tasks and care expenses. Keep track of all the costs to get an overview, and then set a family meeting to discuss how they can help.
Lastly, research the available programs in the area. Some senior-friendly communities may offer services like free transportation or discounted adult day care centers. This can help save money in the long run.