5 Powerful Ways to Build Financial Readiness as a Caregiver

What is financial readiness for family caregivers?

Financial readiness means handling your money so you can care for someone without extra stress. It’s about smart choices like setting a budget, saving often, and using programs or benefits that can ease caregiving costs.

If you or a loved one served in the military, you are likely familiar with this concept. In the military, financial readiness means being able to cover your expenses so money problems don’t hurt the mission.

The U.S. Department of Defense offers education, resources and counseling that can help service members stay financially strong. Groups like USAA and Navy Federal Credit Union also offer tools that promote financial security.

The same principle applies when your “mission” is caring for a loved one. If you make financial readiness a priority, you’ll stress less, focus on your loved one and feel more confident about the future.

How to Build Financial Readiness

Caring for someone you love can bring both joy and stress. Along with emotions, family caregiving often brings financial challenges. Financial readiness means being prepared for current and future caregiving costs. It includes planning, clear communication, legal protection and keeping your own financial security intact.

Here are five practical ways family caregivers can build stronger financial readiness for themselves and those they care for.

1. Know the real costs of caregiving.

Caregiving is more than giving your time. It costs money. In the U.S., family caregivers spend about $7,200 a year out of pocket on health care, home changes, and daily needs. That’s almost 26% of their income on average.

Some caregivers spend even more, especially those helping someone with memory loss or dementia. These costs can spike sharply.

You also may earn less income. One in 5 caregivers has had to take a leave of absence or a demotion to continue caregiving responsibilities. Some studies show caregivers lose hundreds of thousands of dollars in wages, benefits, and retirement savings over time.

Caregiver Insight: Track both caregiving costs and how your income may change. Use this info to plan and adjust your monthly budget.

2. Communicate and share plans as a family.

Planning makes things a lot easier. Start conversations about long-term care before a crisis happens. Talk with your loved one about their needs, wishes and budget.

You can hold regular family meetings online or in person to share updates, track spending, and divide responsibilities. When everyone understands the plan, it can reduce caregiving stress.

Caregiver Insight: Set up shared documents or a group chat to help you quickly inform everyone about any needed changes to the plan.

3. Secure access to important documents and organize them.

In an emergency, you need quick access to documents and funds. Gather important papers like insurance cards, bank statements and pension info.

There’s a difference between just being able to view documents and having legal access to them. Consider setting up joint accounts or secondary access at the bank. That ensures your loved one’s bills get paid and it protects their assets.

Caregiver Insight: Create a “master list” of where key documents and account logins are stored so you don’t have to scramble for them in an emergency.

4. Use legal tools and agreements wisely.

Having the right legal papers in place can spare you from stress and costly court battles. Here are the key documents:

• Durable Power of Attorney (DPOA): Allows you to handle finances and property on behalf of your loved one, even if they can’t make decisions.
• Health Care Proxy or Living Will: Lets you make medical decisions when they can’t. A Living Will outlines what kinds of care your loved one wants or doesn’t want.
• Personal Care Agreement: A written contract that explains the care services you give and how you get paid. It helps families stay fair to each other and it may also be useful for Medicaid planning.

Without these, families may face expensive guardianship or conservatorship court actions, which can add cost and stress.

Caregiver Insight: Talk to an elder law attorney for guidance. Many offer free or low-cost advice for caregivers.

5. Protect your financial future.

Your financial security matters — today and into the future.

If caregiving affects your job, look closely at the impact on your retirement savings and benefit eligibility. Try to stay at work long enough to be fully vested in your retirement plan. Avoid early withdrawals — even for emergencies — to preserve your future financial security.

Create and stick to your budget by listing your expenses, income, debts and savings. Make small steps like saving a little each month, checking your credit, or exploring individual retirement account (IRA) options. If possible, consider long-term care insurance or a health savings account (HSA) for your own care down the road.

Caregiver Insight: Use flexible work options, a flexible spending account (FSA), or other employer programs that may ease your financial and caregiving burden.

You can practice financial readiness while caring for others.

Caring for someone else doesn’t have to mean losing your own financial footing. By understanding the true costs of caregiving, talking early with family, organizing documents, using legal tools and protecting yourself, you’re building your financial readiness.

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Caregiver Financial Readiness FAQ

Why are caregiving costs so high?

Professional caregiver staffing shortages and high turnover rates increase the demand for caregivers, which in turn drives up costs. Also, the U.S. doesn’t have a comprehensive, government-funded long-term care system. This places a heavy financial burden on individuals and their families.  

What if my caregiver duties reduce my job hours?

Communicate your needs honestly with your employer. Investigate what flexible work arrangements or workplace programs may be available to you. You can also research any financial assistance and support programs available within your community.

What key legal documents should be in place?

Durable Power of Attorney, Health Care Proxy, Living Will and a Personal Care Agreement are essential to avoid stressful and expensive court battles.

How can family meetings help with caregiving finances?

They bring everyone together to share costs, make decisions fairly and reduce stress when emergencies arise.

How can I support my own retirement while caregiving?

Use employer benefits, stay vested in retirement plans, avoid early withdrawals and consider long-term care savings options.