Brooklyn FI’s Financial Guide for Caregivers
Whether you’re looking after young children or helping out aging parents, taking care of others could throw a wrench in your financial plans—especially if you have to step out of the workforce for a bit. Nineteen percent of employed family caregivers say they had to quit their jobs to care for a loved one, according to a 2021 survey from the Rosalynn Carter Institute for Caregivers. Four in 10 said they had to go down to part-time work.
Family comes first, and sometimes that requires us to change our plans. What matters most is making sure your financial health doesn’t suffer as a result. That’s why we put together this quick financial guide for caregivers. Taking care of loved ones doesn’t have to mean sacrificing yourself.
1. Think About Your Cash Flow
Caregiving can change your monthly budget in a few different ways. Leaving your job or dialing things down at work will obviously affect your income. In some cases, your household budget may also stretch to accommodate new caregiving expenses. That might include:
Daycare, before care or after care
Home health aides
Rehabilitative care like physical therapy, occupational therapy, or speech therapy
Potential Solutions
Whatever your needs are, think about your out-of-pocket costs. Will health insurance pick up any part of the bill? A dependent care flexible spending account (FSA) can also come in handy. It allows you to set aside pre-tax dollars you can use to cover qualified dependent care expenses. You can check to see if one is offered through your employer.
You’ll also want to revisit your budget to see how much financial wiggle room you have for monthly caregiving expenses. Some parents may feel it makes more sense for one partner to stay home with little ones until they’re big enough to start school. Others might decide that staying in the workforce is the way to go. There’s no right or wrong answer here. Every family is different, so you have to do what feels right for you. From there you can adjust your budget accordingly.
2. Consider Your Career Trajectory
If you do decide to step away from work, take the long view and think about how that could affect your long-term earning power. When you’re ready to return to work, prospective employers could use your previous pay to reduce your leverage in a salary negotiation. One bright spot: over a dozen states and cities have passed laws prohibiting employers from asking job applicants about their salary history. Still, a large gap on your resume could work against you when you’re looking for a job.
Potential Solutions
Staying connected to your field could go a long way. If caregiving forces you to leave a traditional 9-to-5 role, freelancing or consulting a little on the side can provide relevant work experience to keep your resume fresh. It can also lead to new contacts and help widen your professional network—something you’ll be grateful for if you choose to return to full-time work.
3. Don’t Forget About Retirement
Taking care of loved ones could make saving for retirement a little tricky. Those who continue working might need to trim their retirement contributions to pay for caregiving expenses. If you end up leaving your job, you may stop contributing to an employer-sponsored retirement plan (like a 401(k) that matched some of your contributions). You can still be a caregiver and plan ahead for your future.
Potential Solutions
Look into a spousal IRA. These types of retirement accounts are held in a non-working spouse’s name but allow the working spouse to contribute on their behalf. If you have money coming in from a side gig or freelance work, you can also open a traditional IRA or Roth IRA and start funneling some money into those accounts. Just keep in mind that you have to be under certain income limits to contribute to a Roth IRA.
If your earnings increase in the future, you can ratchet up your retirement contributions to make up for lost time. Folks who are 50 and older can also take advantage of catch-up contributions. They allow you to kick in more to tax-advantaged accounts like 401(k)s and traditional IRAs.
4. Create Healthy Boundaries
Caregiving can be stressful—and it can feel tough to say no, especially when it comes to family. One in two parents of adult children still provide at least some financial support, according to a recent Savings.com survey. That could cause a real financial strain if you’re also taking care of aging parents. Creating healthy boundaries can help protect your financial and mental well-being.
Potential Solutions
If you’re providing financial support to a loved one, ask yourself if it’s impacting your ability to meet your own financial goals. If so, it may be time to rethink your arrangement. That might mean asking your adult child to begin paying rent, or talking with your siblings about chipping in toward mom and dad’s care so the burden isn’t squarely on you. You might also need more support with the logistics of caregiving. Taking time off work, driving loved ones to appointments, preparing meals… It can be a lot. A healthy boundary could be asking other family members to step in and ease the load.
If you’re a caregiver, chances are you’re an empathetic person who values family. That’s a good thing—just don’t forget to take care of yourself too. That includes your financial health. We’re here for folks looking for a nudge in the right direction.