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4 Financial Tips for the Sandwich Generation

Joe Udo

If you have a parent age 65 or older and provide financial support for a child, you are part of the sandwich generation. According to the Pew Research Center, nearly half (47 percent) of adults in their 40s and 50s care for both an aging parent and a child. This can be tough on your finances, and it will make retirement saving much more difficult.

Of course, we have an obligation to help our parents and children when they need it. However, we also have to look out for ourselves. Just because we support one or more family members doesn't mean we can neglect our own retirement planning. During tough times like this, everyone has to pitch in and cut back to make it work. Here are a few ideas to help you care for family members without jeopardizing your retirement:

Reduce college expenses. College tuition is expensive, and room, board and other expenses add even more to the cost. One way to save is to live at home and attend a local university or community college for two years. Going to an in-state college might not be as prestigious, but you won't have to pay out-of-state tuition either. If you are having a hard time financially, don't forget to apply for financial aid and as many scholarships as you can. If you really need help, then getting a student loan is also a valid option. Make sure to help your children figure out how to spend money wisely so they don't rack up huge student loan debt.

Move back home. The unemployment rate for young adults is nearly double the national rate and many people have moved back home. This is not a bad thing because it's certainly better than sending them money every month. Feeding another mouth may cost some money, but I'm sure most families can handle it. The bigger cost will come from other expenses such as cell phone bills, car payments and gasoline. If your child is unemployed, then you will need to stick to your guns and cut their budget to the bone. You need to put your retirement saving before their social life. Hopefully, they can find employment and start contributing to the household at some point.

Combine households. If your parent needs financial help, then consider combining households. Moving in together can be difficult, but it is one of the most effective ways to cut costs. You'll save on home insurance, transportation, child care, long-term care and many other expenses. Many families are already doing this because of the economic downturn, so you won't be the only one.

Find tax savings. Check with your tax preparer to see if you can claim your adult children, grandchildren or parents as dependents. For each dependent, you can reduce your 2012 taxable income by $3,800. That will buy a lot of groceries to feed everyone. The rules are not that complicated and the IRS will even figure it out for you here after you answer a few questions.

Being a part of the sandwich generation can be tough financially and emotionally. You will have to think of creative ways to manage your finances and save for your retirement as well. Hopefully you can work together with your family to come up with a solution that will help everyone until the economy improves.

Joe Udo blogs at Retire By 40 where he writes about passive income, frugal living, retirement investing, and the challenges of early retirement. He recently left his corporate job to be a stay at home dad and blogger and is having the time of his life.

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