This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on October 12 - 18, 2015.

Irene Lee is a licensed financial planner with CWA.

MANY are in a situation where they are caring for their own children as well as their ageing parents. Are you one of them? If you are, you are a member of the "sandwich generation". You are squeezed between the responsibilities of caring for both the younger and older generations.

With people marrying later and parents living longer, this situation has become very apparent. Life used to be so much simpler. We had more family members and someone in the extended family was always there to lend a helping hand. With progress, scarcity seems to appear. Fewer children, fewer stay-at-home mothers, less time to help.

Ann is caught in such a situation. She is a 48-year-old single mother with a 19-year-old daughter, Crystal. Ann's mother, Lily, 68, was widowed at a very young age, and Ann is her only child.

I met Ann three months ago and she was very concerned about her financial situation. She has to fund Crystal's education, take care of mum and plan for her own retirement. With her mother getting older and her retirement getting nearer, she does have cause for concern. Let's look at where she is now.

Net worth

Ann has total assets of RM1,546,000 and her total liabilities are RM150,000. Her net worth is RM1,396,000. I found that her solvency ratio is very good and her debt ratio is only 9.7%. Being a very responsible mother and daughter, she saves every penny she has for their future.

Ann has five financial goals with an effective cost of RM2,695,981 today. This is the amount of money she needs now to fund all of her objectives. Table 1 lists her goals, when each is expected to start and stop, and whether the outlay is to be indexed (with increased cost each year). The amount per year is the cost of the goal if she were to begin paying for it this year.

Unfortunately she will not be able to achieve all her goals if she does not make any changes to her portfolio. The main thing that she needs to look into is to diversify her investments. Most of her investments are parked locally and a big part is in fixed deposits. I recommended that she diversify into local, regional and global markets for a more balanced portfolio. 

I found out that she does not have any income protection plan or any medical plans for herself. She is the general manager of a hotel chain and these are covered by her company. Her medical fees (including for her daughter and mother) are covered. Her company also has a group term plan that covers five years of her income upon death or critical illness. Thus, there was never a need to look into it. 

With the present situation, I wanted her to get a medical plan for everyone in the family. I also suggested that she take up a critical illness insurance plan before the premium becomes too expensive because of old age, and also before she becomes uninsurable if health issues arises because of age. With this risk taken care of, she will not need to dig too deep into her “nest egg” when the inevitable happens.

Since Crystal is expected to finish her education in two years’ time and start working, expenses will be reduced by then. Ann will be able to save more towards her retirement. However, she will have to delay her Europe trip due to insufficient funds in 2018. She can choose to go to a cheaper destination. With our ringgit sliding so much at the moment, that dream holiday is getting more expensive.

Table 2 shows the current situation and the strategy for Ann to achieve her goals and take care of her daughter, mother and herself. We will do a review every year and keep tabs on how she is doing.

Being a member of the sandwich generation is not easy, especially in Ann’s situation. With no siblings to help out with her mother and no spouse to help out with her daughter, she really is a remarkable woman to have managed so well thus far. 

Our next appointment is in a few weeks and I will be setting up her will for her with a corporate trustee and executor to manage her estate upon her demise. A trust will be set up to take care of her mother over the long term. 

For Ann, the journey towards retirement will be welcomed with pleasure. Her mother’s long-term care is in place and Crystal will be graduating soon. Being a member of the sandwich generation is a common thing nowadays. We just need to know how to manage it.

* For queries, email us at [email protected]

* * All information contained herein is solely for educational and awareness purposes and should not be construed as an offer or a solicitation of an offer to purchase or subscribe to products offered by CWA. No representation or warranty is made by the said financial planner and/or CWA nor is there acceptance of any responsibility or liability as to its accuracy, completeness or correctness.

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