By N Sriram
If you are between 30 and 45, with ageing parents and a young child or children to look after, well, you belong to the sandwiched generation. You need to tackle the health concerns of the aged and provide for the expenses of children. Is there something unique about this? Yes. Take the older generation that has retired, first. A larger part of their career was spent in the pre-liberalisation era when salaries were measly compared to present day levels. They paid much higher taxes. Sure, they earned high and assured returns too on deposits and small saving plans, but these were on relatively smaller savings, and so it did not matter much.
Luckily, they didn't spend much. Choices were fewer and cheaper. Even the IITs charged only a few hundred rupees a year to impart world-class engineering skills.
Above all, the older generation had one great comfort. They could take for granted that their children would take care of them in their sunset years. They may live independently and possibly away from their children, even in old age homes, but in general, their children provide for their financial needs, and more certainly for financial emergencies.
Now think of your children in schools. You must be spending on them in a year what your parents spent on you in a decade or more. More is yet to come. It is now possible for even average Indian students to seek admission to universities abroad, which lead to better job prospects. But it costs a lot more. Even if your child goes for an education loan from a bank, you may have to set aside a huge sum as collateral for it.
And after all this, do you seriously expect your children to look after you when you grow old? You would rather not include any contribution from your children while planning for retirement, right? They would probably be living in some distant part of the planet and leading such busy lives that to expect them to visit you even in emergencies would be a fantasy. Values too would have changed, and your children may not feel their obligation towards you as strongly as you feel towards your parents.
Do you understand the predicament of the sandwiched generation now? You spend on the elders. You spend a fortune on the younger dependants but it is unlikely that they would be in a position to return the favour when you grow old. You are unlikely to figure in their retirement plans and are unlikely to get the financial care that you gave your parents.
Your retirement plan should reflect this reality about dependants. Here are a few broad guidelines:
If you are between 30 and 45, with ageing parents and a young child or children to look after, well, you belong to the sandwiched generation. You need to tackle the health concerns of the aged and provide for the expenses of children. Is there something unique about this? Yes. Take the older generation that has retired, first. A larger part of their career was spent in the pre-liberalisation era when salaries were measly compared to present day levels. They paid much higher taxes. Sure, they earned high and assured returns too on deposits and small saving plans, but these were on relatively smaller savings, and so it did not matter much.
Luckily, they didn't spend much. Choices were fewer and cheaper. Even the IITs charged only a few hundred rupees a year to impart world-class engineering skills.
Above all, the older generation had one great comfort. They could take for granted that their children would take care of them in their sunset years. They may live independently and possibly away from their children, even in old age homes, but in general, their children provide for their financial needs, and more certainly for financial emergencies.
Now think of your children in schools. You must be spending on them in a year what your parents spent on you in a decade or more. More is yet to come. It is now possible for even average Indian students to seek admission to universities abroad, which lead to better job prospects. But it costs a lot more. Even if your child goes for an education loan from a bank, you may have to set aside a huge sum as collateral for it.
And after all this, do you seriously expect your children to look after you when you grow old? You would rather not include any contribution from your children while planning for retirement, right? They would probably be living in some distant part of the planet and leading such busy lives that to expect them to visit you even in emergencies would be a fantasy. Values too would have changed, and your children may not feel their obligation towards you as strongly as you feel towards your parents.
Do you understand the predicament of the sandwiched generation now? You spend on the elders. You spend a fortune on the younger dependants but it is unlikely that they would be in a position to return the favour when you grow old. You are unlikely to figure in their retirement plans and are unlikely to get the financial care that you gave your parents.
Your retirement plan should reflect this reality about dependants. Here are a few broad guidelines:
Seek health risk covers for elders: If you don't have health insurance covers for your parents or other elder dependents at home, go for one straight away. Even a 65-year-old person can get a cover of up to Rs 5 lakh with a premium ranging from Rs 9,000 to Rs 13,000 with a host of health insurance firms. Explore all the available covers and go for one or more. Never mind if your parents are fighting fit now. Health concerns may arise suddenly and before you know it, your kitty could be depleted.
Separate savings for education and retirement: Get a fix on your child's future education expenses. Include all possible costs - peripheral expenses like fees for coaching classes, books, computers, boarding expenses to prepare for competitive exams, fees for professional courses, and the big daddy expense of them all - expenses for overseas education. You might explore child plans of insurance companies. You could also start saving systematically in mutual funds after consulting a financial planner. Encourage financially responsible behaviour in your children. That would prove invaluable.
Plan wealth transfers: You might be too embarrassed to talk to your parents about any idle wealth they are holding, like a property held for sentimental reasons in a distant town, and use it to strengthen the family finances. But what you should surely do is decide how much inheritance you would like to leave for your children.
You should also think in terms of newer expenses that you might incur on your children. For example, you may not have to spend a huge sum on your daughter's marriage - she may desire a simple civil wedding - but you may have to set aside a start-up fund for her if she wants to set up a business of her own.
Finally, find answers within yourself for a few uncomfortable questions about dependants. Like, how much would you be willing to spare out of your retirement kitty for your children's education or other expenses, if expenses go way beyond your estimates and savings? If your parents' health concerns threaten to wreck your plans for your own retirement or children's education, which way would you tilt? There are no textbook answers to these questions. Your answer should be in proportion to your commitment to your dependants.
Focal Points
Health concerns of elders and education expenses of children could pose serious challenges to your financial plans
Elders earned low incomes and had fewer choices to spend on, but they had the comfort that they could depend on you for financial needs and emergencies
You would spend a fortune in educating your children but you cannot possibly expect them to care as much for you as you have cared for your parents. Values have changed. There may also be locational hurdles
Separate savings for education and retirement: Get a fix on your child's future education expenses. Include all possible costs - peripheral expenses like fees for coaching classes, books, computers, boarding expenses to prepare for competitive exams, fees for professional courses, and the big daddy expense of them all - expenses for overseas education. You might explore child plans of insurance companies. You could also start saving systematically in mutual funds after consulting a financial planner. Encourage financially responsible behaviour in your children. That would prove invaluable.
Plan wealth transfers: You might be too embarrassed to talk to your parents about any idle wealth they are holding, like a property held for sentimental reasons in a distant town, and use it to strengthen the family finances. But what you should surely do is decide how much inheritance you would like to leave for your children.
You should also think in terms of newer expenses that you might incur on your children. For example, you may not have to spend a huge sum on your daughter's marriage - she may desire a simple civil wedding - but you may have to set aside a start-up fund for her if she wants to set up a business of her own.
Finally, find answers within yourself for a few uncomfortable questions about dependants. Like, how much would you be willing to spare out of your retirement kitty for your children's education or other expenses, if expenses go way beyond your estimates and savings? If your parents' health concerns threaten to wreck your plans for your own retirement or children's education, which way would you tilt? There are no textbook answers to these questions. Your answer should be in proportion to your commitment to your dependants.
Focal Points
Health concerns of elders and education expenses of children could pose serious challenges to your financial plans
Elders earned low incomes and had fewer choices to spend on, but they had the comfort that they could depend on you for financial needs and emergencies
You would spend a fortune in educating your children but you cannot possibly expect them to care as much for you as you have cared for your parents. Values have changed. There may also be locational hurdles
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