This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on Jan 11 - 17, 2016.

How do the members of the sandwich generation, who find themselves having to take care of both children and parents, manage?

LICENSED financial adviser and group managing director of KP Global Holdings Sdn Bhd Brenda Yong says something the sandwich generation may want to consider is starting a home or online business. 

“Nowadays, if you look at the market, everything is a home business. If you ask any random man on the street, there’s a high chance that he has some sort of home or online business that he runs on the side. Those days you had to work hard but nowadays, you have to work smart.”

However, she warns that while it is good to generate extra income to supplement their retirement needs, they need to be careful not to get scammed, especially by getting themselves involved in get-rich-quick schemes.

“Because they are stuck [in the sandwich], they might resort to get-rich-quick schemes. There are a lot of these schemes in the market. Some even fly to China, thinking that the return on investment looks good, place RM60,000 there and hope to have good returns. People should avoid this,” says Yong.

In terms of investment, if you have more time and loftier goals, it is all right to be aggressive to get a higher return, Foo says, adding that just because an investor is older does not mean that they have to be more conservative when investing.

“Of course, you need to be smart aggressive, not just simply aggressive and buy into all kinds of investments … that is just being stupid aggressive. You must be smart and informed even though you are aggressive. It doesn’t depend entirely on your age; it is based on how much time you have [to reach your goal]. If you don’t know what to do, talk to an independent financial adviser,” he says.

Robert Foo of MyFP Services Sdn Bhd advises investors to diversify by having a global perspective instead of only focusing on local investments as Malaysia’s investible size is small. “Malaysia only represents 2.5% to 3% of the global investible size. If you are going to put all your money in the 2.5% opportunity, then you are not diversifying. So, when something happens, such as the ringgit falling from 3.20 to 4.40 [against the US dollar] within a span of a few months, you are dead!” he points out.

Sandwich generation investors must diversify their investments as much as they can to avoid being hit by any uncertainty or potential risks around the world, says Foo. “The worst thing is that once you are badly hit, chances are it is very hard for you to get back up.”
 
Solutions to look out for

The sandwich generation’s dependants will be hard hit in the event of the former’s death. That is why they need to be especially thorough when it comes to estate planning.

“The sandwich generation is like a money-making machine. Every month, they provide money to their children and take care of their parents’ expenses. So, if this money-making machine breaks down, the tap stops. This will make it very difficult for the people they leave behind,” says Kam Teik Guan, associate partner at IPP Wealth Planners Sdn Bhd,.

To make sure that their dependants have a sum of money that they can use to move on with life, those in the sandwich generation need to get themselves insured. “Getting insured is the cheapest way to guarantee money for those you leave behind. They can tell their family not to worry if anything happens to them because they have taken care of everything beforehand,” says Kam.

The sandwich generation must also prepare a will so that their assets are distributed in the manner that they envision, he adds. “They would need to appoint a dutiful executor to make sure that their family members get the money every month even when they are no longer around. If they don’t have an individual they can appoint, then they can just hire a trust company. The companies will charge a small fee, but they can rest assured that the money will go to their family.”

Tan Mei Yin, assistant general manager for training and business development at Rockwills Corp Sdn Bhd, says getting a proper trustee and enforcing the trust instructions are important. When writing a will, a lot of people only think about whom they are giving their assets to without thinking about the long-term implications.

“For elderly parents, generally what they need is not the asset per se, but a roof over their heads and someone to help them out with their medical fees and living expenses. It’s more about giving them financial assistance and provision,” she explains.

“For their children, will they be mature enough to know how to manage the money and not to waste it? For all these concerns, those in the sandwich generation should set up certain conditions and restrictions, and the only way to do it legally is for you to issue and enforce a trust instruction.”

If their parents can still qualify for insurance, the children should get them medical and personal accident insurance, says Kam. “The older our parents get, the more prone they are to get into accidents such as slipping in the toilet. Their sickness is normally due to accidents. So at least with personal accident insurance, if they fracture themselves, hospitalisation is covered.”

People should be savvy when choosing a way to grow their funds for special purposes, says Foo. “Some people think that you should buy insurance policies to fund your children’s education. I always tell my clients that this is the wrong thing to do. Insurance is just for protection. Never buy endowments or investments through insurance because it is a very inefficient way of building funds. If you want to invest, buy unit trust, property or shares — don’t buy insurance.”

Yong reminds those in the sandwich generation that if they are having trouble planning or managing their funds, it is best for them to reach out to certified financial advisers. “Find a financial adviser to help you navigate the numbers. If I’d had a financial adviser who really knows what he is talking about, I wouldn’t have had to go through so much hardship,” she says.

“Get an expert who can walk alongside you. A true financial adviser is a mixture of counsellor and life coach. It is not about pushing products. The financial adviser needs to know about your life before he sells you a product. If not how can he be your pillar of strength?”

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.