Your 40s and 50s will often be the time when your financial responsibility peaks. You’re likely to be paying a mortgage and saving for your future goals, while also potentially supporting two or more different generations of your family.
New research has revealed that the recent cost of living crisis could be affecting so-called “midlifers” twice – once because your own bills are rising but also because it may cost more for you to provide the support you need for loved ones.
Read on to find out more about why the effects of high inflation could be doubly difficult.
Midlifers provide more than £10 billion of financial support each year
Research from Legal & General shows that more than 1 in 6 people in midlife – people aged 40 to 60 – provide financial support to an adult in their life such as an elderly parent or grown-up child, at a collective cost of £10.4 billion a year.
If you’re supporting an adult child, you will spend an average of £247 a month, whereas midlifers who provide financial support to an elderly parent or relative will spend an average of £282 a month, in addition to their own household expenses.
Of course, if you’re looking after both these generations, your outgoings could be significant.
Alongside financial support, you may well be relied upon to provide unpaid care to elderly relatives or childcare for grandchildren while also juggling your life and career. The average amount of time taken up by unpaid care is the equivalent of a part-time job, at nearly 15 hours a week.
The Covid-19 pandemic has increased these pressures further, with those in midlife spending more time and money supporting their loved ones.
Just over half (52%) of 40- to 60-year-olds in the UK have seen their financial pressures grow, while 34% say that it has increased the time pressure they face.
The rising cost of living could mean you’re being hit twice
If you’re providing support to an older relative or an adult child, you may well already be feeling the pinch when it comes to your expenses.
However, the rising cost of living could be further exacerbating this problem. The latest figures from the Office for National Statistics (ONS) show that inflation reached 9% in April 2022 – its highest level in 40 years.
Essentially, this means that prices are 9% higher than 12 months ago. Something that cost £100 a year ago will cost, on average, £109 today.
If you provide essential financial support to loved ones, you could be hit twice by the rising cost of living due to increases in both your own household costs and those of the adult loved ones you support.
Analysis from Legal & General suggests that the financial responsibility of people aged 40 to 60 could rise significantly in 2022. The Resolution Foundation state that families have faced a typical income hit of around £1,200 a year from April 2022 as a result of tax rises and soaring energy bills.
If you consider that your expenses may be rising along with those of the people you support, you can see why inflation could be having a dual effect. For example:
- If you have an adult child living at home, soaring food and energy prices could be adding to your bills on top of your own expenses
- If you’re travelling regular distances to care for older relatives, your fuel bills will likely have risen sharply
- If you’re contributing to the living costs of a parent or grandparent, their bills will also have risen.
Additionally, as inflation continues to rise, and with another energy price hike looming in the autumn, the situation may get even worse later this year.
3 ways you can make sure your plans stay on track if your expenses have risen
If you want to ensure you can keep your finances on track in an environment of rising prices, here are three tips.
- Keep an eye on your budget
Budgeting is the cornerstone of good financial planning. Knowing what your income and outgoings are can help you to ensure you’re saving enough for the future and avoiding expensive debt that can take years to repay.
If you haven’t reviewed your budget lately, take time to sit down and consider your income and expenditure. Remember to include the “extra” costs you have for supporting adult relatives.
You may find there are unused subscriptions or gym memberships you can cancel, or ways to make savings that would enable you to maintain your lifestyle.
- Make the most of your savings
You may think that having your money in cash savings during uncertain times is a good policy. Certainly, keeping three to six months’ expenses in an easy access savings account as an emergency fund is excellent practice.
However, if you hold too much of your wealth in cash it’s likely to be losing its value because of high inflation.
According to Moneyfacts, as of 16 June 2022, the highest interest rate you could earn on an easy access savings account is just 1.52%. If you had saved £10,000 a year ago at this rate of interest, you’d have £10,130 now.
Compare this to an inflation rate of 9%. Goods and services that cost £10,000 a year ago cost £10,900 today, so your savings have lost much of their spending power.
Working with a financial planner to devise a financial plan that considers your long-term goals, time frame, and risk tolerance can help you to create a well-diversified portfolio that can help your money retain its value in real terms. This brings us to…
- Work with an expert
One of the best ways to ensure you can meet your medium- and long-term goals is to work with an expert.
We can help you to build a financial plan that balances living the life you want now and in the future. We’ll help you stay on track when times are difficult and ensure you can provide the support you want to your adult relatives without damaging your own plans.
To find out more, please get in touch by email at enquiries@hda-ifa.co.uk or call 01242 514563.
