Family financial planning is an important process for every family, but it’s also different for every family. Financial plans for families have to consider factors like whether you’re married, self-employed, or are currently working, have a disability, among many others. You also have to consider whether you’re a caretaker.
Who is a primary caregiver? Primary caregivers are those who regularly look after a child or a person who is sick or otherwise incapable of self-care. Adults incapable of self-care often include dependent adult children, parents, a spouse, or a family member with a disability.
If you’re a caregiver, getting from start to finish in your financial plan can be daunting. To help get started on creating a financial plan, we’ve created this 4-part family financial planning guide for caregivers.
In this Article:
What is the first step in financial planning? Setting financial goals. Setting both small and large goals will ensure that your family’s financial plan meets your family’s unique needs.
Before getting into the weeds of your current finances, take time to think about your goals. The financial planning process can feel overwhelming, which might make goals feel far away or unlikely. Don’t worry! You’re not alone in that.
To help you brainstorm, answer the following questions that apply to you:
Specific questions for caregivers:
Budgeting is a matter of planning to save and also planning to spend. As a caregiver, budgeting will include additional costs, but also unique savings.
There are different approaches to budgeting. Some common approaches include the 50/30/20 system, the envelope system, and the pay-yourself-first system:
If you’re a caregiver, you’ll need to incorporate your dependents into whatever approach you use because they’ll have their own unique budget needs. For example, programming and activities for daily living may have additional costs. Consider the following expenses:
If you have dependents, the federal tax code provides various forms of tax benefits to consider as you’re creating your budget. Although they’re initially difficult to incorporate into your family financial planning, knowing which tax benefits you can claim will save you money.
Child and Dependent Care Tax Credit
With this tax credit, you can claim up to 35% of your child and dependent care expenses. To qualify, expenses must be for the care of qualifying children or dependents and work-related.
Child Tax Credit
Parents can claim up to $2000 for each child who has not turned 17 by December 31st of the applicable tax year. Under the American Rescue Plan, the age limit was extended to 17 years old through the 2021 tax year. Your total credit amount depends on your income.
Credit for “Other Dependents”
If your child is 17 years or older, they can qualify for the tax credit for other dependents, or adult dependents. An adult-dependent may be a parent, sibling, cousin, or even someone who is unrelated to you. They must meet the IRS’s requirements.
Head of Household Filing Status
Obtaining head of household filing status provides tax benefits including a higher standard deduction. To qualify, you must:
Family care services are an essential part of family financial planning; finding care services for those you care for. The extent to which you use care services will depend on whether you are employed, the status of the person you’re caring for, and your budget.
There are many types of care services for children and adult dependents. Some are work-related, meaning they’re provided to a dependent so that you can go to work. Others are to provide respite to you as the caregiver.
Types of care services include day programs for adults with disabilities, work programs, elder care day programs, home care, daycare, preschool, nannies, or babysitters. They can be provided by non-profits, companies, or even friends paid as caregivers.
How to Find Care Services
An important consideration in the family financial planning process is the cost of care services. In addition to tax benefits, other sources of financial support for caregivers include employers, social security, and other government programs.
Employers: Employee Care Benefits
Many employers offer care benefits to employees who are either working parents or caregivers to adult dependents. Benefits vary depending on the employer and the state where you work. For example, some states require certain care benefits. Which benefits you elect will depend on who the care recipient is, and what your care goals are.
Common care benefits include:
If your employer does not already offer care benefits, refer them to Helpr below:
Social Security Income and Social Security Disability Income
Social Security Income (SSI): SSI is a federal program that provides income to adults and children with disabilities. The program is income-based and is meant to assist people with disabilities who have limited income and resources.
Social Security Disability Income (SSDI): SSDI is a federal program for individuals who are “insured.” To be insured, the person applying must have worked long enough to qualify.
Other Government Programs
There are many government programs that provide financial assistance such as State Disability Insurance (SDI), PACE programs, or childcare subsidies. For state-specific funding resources, contact your state’s department of human services.
Estate planning is an essential piece of the family financial planning process. The following three legal documents are common elements of an estate plan to consider:
To create an estate plan, contact an estate planning attorney.