Less than one third of caregivers had any discussions or plans before their hard work began, leaving them at significant financial risk
The work of caregiving is often quiet and costly. It goes unnoticed by many but for those caring for loved ones, it takes a significant physical, emotional, and financial toll. Lila Day, Financial Advisor with Edward Jones in New Westminster B.C., has borne those costs personally. At age 18 she became the primary caregiver for her grandmother when nobody else in her family could spare the time away from their work and children to do the work of caregiving. From ages eight to 14 she was the caregiver for her disabled brother, which placed enough of a strain on her personally that she had to leave home. That work, she says, is “just what you did” but without plans or conversations about it she bore a disproportionate cost for the care she provided.
Day shared her personal stories in the context of a recent study released by Edward Jones outlining the financial risks and emotional costs associated with caregiving. The survey found that among Canadian caregivers, more than 70 per cent have had no or very little planning or preparation. Despite the realities of aging, the risk of illness or disability, and a broadening social awareness on the needs of caregiving, Day says there’s still a preparedness gulf that advisors should work to close.
“I grew up in a generation where you didn't ask your parents about money. You didn't talk about a will. You didn't do any of these things because it was rude,” Day says when asked why so many Canadians seem unprepared. “Now I think we're coming into the realization where we need to have these conversations. Things need to be talked about.”
How caregiving touches finances
Caregiving has become an acute financial challenge, in Day’s view, because of the shift to multi-income households to manage the cost of living. She notes that in her grandparents’ generation, when a single income could support a family, her grandmother played that caregiving role for older and younger generations. Now, for most families, two incomes is a necessity. Losing a household earner to the unpaid work of caregiving can have huge impacts on a family’s capacity to earn, save, invest, and prepare for their own retirements.
That pressure is at its most acute for the so-called ‘sandwich generation,’ those with both children and aging parents to take care of. Often times the caregiving that those Canadians provide is financial more than physical, bearing the costs of nursing, care homes, or medical expenses. The study found that, on average, these ‘financial caregivers’ pay around $7,025 per year when the person they are caring for has some resources, and $10,190 per year when they person they are caring for has insufficient resources.
The result for those financial caregivers is a personal financial sacrifice. 46 per cent of the caregivers surveyed say they make personal sacrifices to care for their parent and most of those sacrifices are in savings. That includes reducing savings contributions, tapping into non-retirement savings, and borrowing from retirement accounts. In the case of 22 per cent of those making sacrifices, it involves taking on additional debt. While some lifestyle changes are to be expected in caregiving, Day says that a few hard planning conversations can prepare people to reckon with the financial realities of caregiving before they have to start the work.
How to talk about caregiving
Caregiving conversations can be a challenge, Day says, because the topic can be difficult for everyone involved to confront. They involve taboo conversations around wealth, wills, and healthcare that many people prefer to avoid. Those conversations can quickly stray into the ‘unseemly’ as topics like bathing frequency, bedsores, and end of life planning can all crop up.
Day believes that Canadians are getting better at these conversations. As people live longer and face a higher likelihood of requiring care in their elder years, more Canadians have anecdotal examples from their personal networks that can start to motivate a plan. That said, she believes advisors can advance this work by focusing on the financial and estate planning factors of aging.
The advisor’s role, Day says, should be built around the costs and contingencies of caregiving. She notes that advisors can lay out the kind of expenses that a client might face should they require care and talk about the optimal ways to pay those costs from savings. They can also use these conversations to talk about wills and powers of attorney, motivating clients to set those up if they don’t have them already. If clients do have a will and power of attorney, Day believes that advisors need to go deeper, finding out how those documents are structured and if the client has established a healthcare directive. Those conversations might be tough to have, but Day says that they’re immensely valuable down the road.
“Advisors could possibly just be nervous about having those conversations or feeling like they're invading [clients’] privacy or asking too much. But, at the end of the day, we are there to really know the client,” Day says. “If we don't know them through and through, we don't know their family, we don't know dynamics that may or may not come up. How are you supposed to plan for them? You can't. I think in order for us to do our job properly, you need to have these conversations.”
