Caregiving 101: How to Create a Caregiving Budget

Providing care for a loved one is a selfless task, but it’s also costly. A national survey conducted by AARP found the annual cost of caregiving was $7,242, with family caregivers spending an average of 26% of their income on caregiving-related activities.

The costs of caregiving quickly add up, whether you’re on a fixed income or not. Fortunately, there are ways to save. Creating a caregiving budget is one of the best places to start. With guardrails in place, you can better track expenses and identify areas where you can cut costs.

Why Is a Caregiving Budget Important?

Budgeting plays an important role in money management, but it’s not something everyone learns growing up. And, since many family caregivers enter their roles unexpectedly, financial decisions are often made quickly on the fly instead of being planned. Even so, budgeting can’t be overlooked.

“It’s essential to have a budget in place to ensure you’re able to provide the best care possible for your loved one while also taking care of your financial well-being,” shared Andrew Lokenauth, a financial expert with more than a decade of investment banking experience and the founder of befluentinfinance.com. “By prioritizing a budget for your loved one’s medical care and other needs, you can better manage your costs and save money.”

What Factors Should I Consider When Creating a Budget?

There are several factors to consider when creating your caregiving budget. 

Chris McDermott, MSN, APRN-IP, an advanced practice registered nurse and life care planner at Intercoastal Consulting & Life Care Planning in Jacksonville, Florida, recommends focusing on seven of the most crucial caregiving costs:

1) Type of care

If your loved one is still relatively independent but doesn’t drive, you might need to set aside money for transportation. On the other hand, if your loved one is recovering from a stroke, they may need round-the-clock monitoring and professional medical intervention.

2) Frequency of care

Does your loved one need help with routine tasks like bathing, eating, and getting dressed? Maybe they have a chronic illness, like diabetes, that requires regular doctor’s appointments. Think about how often your loved one needs care and the time and commitment involved.

3) Location of care

Caring for a loved one at home is generally more affordable than paying for housing at a rehabilitation center or long-term care facility. Still, depending on the care your loved one requires, these costs may be worth the investment.

4) Medical equipment and supplies

What type of medical equipment does your loved one need? Make sure to factor the following items into your caregiving budget:

• Prescription medicines

• Vitamins and nutritional supplements

• Over-the-counter items (e.g., pain relievers, decongestants, and antacids)

• Special foods (e.g., pureed meals or protein drinks)

• Incontinence products

• First-aid items (e.g., bandages, gauze, antibiotic ointment)

5) Transportation

Is your loved one able to drive? How will you get to doctor’s appointments and social events? If you live in a big city, public transportation or rideshare services may be an option. If you live in the country, check out the Rural Health Information Hub. 

6) Cost of insurance policies

Does your loved one have more than one insurance policy? Don’t forget to budget for each type of coverage, including dental, vision, and long-term care. 

7) Available government assistance programs

“Look into your loved one’s Medicaid and Medicare policy,” McDermott said. “There may be Medicaid or Medicare programs that can help cover the costs of caregiving, such as the Medicaid Health Homes and community-based services waiver program.”

Loukenath agrees, adding that “many states and local governments offer financial assistance for caregivers, including Medicaid waivers, cash assistance, and tax breaks. It's essential to research and take advantage of any financial assistance programs that may be available to you.”

Should I Open a Bank Account for Caregiving Expenses?

Opening a separate bank account for your caregiving expenses can prevent confusion and help you better manage your finances. “There are three reasons I encourage all family caregivers to open a caregiving-specific bank account,” explained Daniel Morris, founder of My Caring Plan, a website dedicated to helping caregivers and seniors navigate the later stages of life.

“First, it’s important to keep your personal finances separate from the caregiving process in order to avoid getting overwhelmed by the financial and emotional burdens of caring for a loved one,” said Morris. “Second, when you do have to make decisions about how to spend money on caregiving, it's helpful to be able to look at your finances as an independent entity rather than as part of your personal life.”

“Finally, creating a separate bank account allows you to keep track of how much money you're spending on caregiving—and that's important because the more transparent you are with yourself about what those costs are, the easier it will be for you to prioritize them and make sure they're covered before any other expenses come up.”

Are There Other Things I Can Do to Manage My Caregiving Budget?

Writing down and calculating all of your monthly caregiving expenses is the first step in establishing a budget, but your planning shouldn’t end there. Several other factors to consider include:

1) Caregiving goals

“Ask yourself what you want to accomplish as a family caregiver,” Morris said. “Are you hoping to save some money so you don't have to rely on others for help? Do you want to pay for a full-time caregiver? Maybe you want to do most of the work yourself.”

You can create a plan to achieve your vision by setting a goal.

2) Support system

Are you your loved one’s sole caregiver, or do you have friends or family members who can provide assistance? “What will happen if things get busy?” Morris asked. “If something happens unexpectedly –– like a trip to the hospital or a major snowstorm ––  who is going to help out?”

3) Emergency fund

No matter how much you plan and prepare, the unexpected will happen. “As a family caregiver, it’s essential to have a plan in place for unexpected expenses and to set aside money each month for potential emergencies,” Lokenauth said. “A good rule of thumb is to save enough to cover at least 3-6 months of expenses.”

4) Meet with a financial coach or planner

Not everyone is good at managing money or financial planning. That’s okay! If you feel overwhelmed or unable to create a caregiving budget alone, consider working with a financial coach, advisor, or planner.

Takeaways

Caregiving can really put a strain on your finances. If you’ve recently stepped into the role, making a budget is the best way to keep track of caregiving-related costs and properly plan your spending. 

By considering factors like:

• The type and frequency of care your loved one needs

• The cost of medical supplies and transportation

• Insurance policies

• Your loved one’s location

Thinking about your finances may not seem glamorous or exciting, but it can help you cut costs and be the best caregiver possible.