Navigating financial security as part of the Sandwich Generation

Tiffany Havinga.

Are you juggling the responsibilities of supporting your parents, adult children and possibly even grandchildren? If so, you might be part of the Sandwich Generation. In my financial planning conversations with clients, this balancing act comes up in at least 35% of our meetings, reflecting a growing trend. According to the Old Mutual Savings and Investment Monitor research report, the “Sandwich Generation” increased from 39% in 2022 to 43% in 2023.

While having your children, their children and parents living with you can be incredibly rewarding, the responsibility can be overwhelming. Balancing financial resources, time and emotional energy while planning for your own secure future can seem nearly impossible.

Ask yourself:

• Can you afford to support children who should be supporting themselves?
• How does this affect your retirement savings?
• Would you need to cut funds available for your own medical care and living expenses as a result?
• What is the long-term impact of the permanent loss of capital and compound interest from a drawdown?
• Will your adult children be able to support themselves if something happens to you?
• Will you eventually need your adult children to look after you?

The impact of enabling dependency

It’s important to consider that you may not be helping your adult children by enabling them to rely on you for financial support. They miss out on building their own income and learning crucial life skills, and their dependency can erode their confidence and hinder their ability to re-enter the workforce. Striking a balance between offering support and encouraging independence is essential. Continually supporting your adult children can perpetuate a cycle of dependency, which isn’t beneficial for anyone involved.

Tips to manage the delicate balance

When it comes to your children:

1. Encourage responsibility and accountability

Teach your children the importance of responsibility and accountability. Encourage them to find work, whether part-time or not, in their preferred field. Any contribution they make towards the household helps build their confidence and reduces your financial burden.

2. Support beyond finances

Offer assistance with job applications, help improve their CVs and pay for coaching or psychological support. Enrol them in courses or connect them with financial planners or business coaches. Brainstorming creative income ideas together can be particularly beneficial. Some ideas my clients have successfully implemented include teaching English as a foreign language, house-sitting, pet-sitting, participating in online surveys, creating digital products (e-books, online courses, presentations), engaging in affiliate marketing, earning royalties from intellectual properties (books, music, patents, graphic designs) and renting out equipment or property (eg, cameras, drones, parking spaces).

3. Set boundaries

If your children return home temporarily to reset their lives, that’s understandable. But if this becomes a recurring pattern, you may be enabling them never to manage their own money. Think about putting boundaries in place to protect your financial security. Teach your children about money management, involve them in financial conversations and set a date when financial aid will stop.

4. Involve children in money conversations

It’s never too early to start speaking to your children about money and teaching them the skills needed for future financial independence. Discussing money openly can demystify money management and encourage responsible financial behaviour.

5. Encourage and celebrate failure

Children need to fail to learn, grow and develop. Let them navigate challenges and find solutions independently. Celebrate their efforts and resilience. Consider asking your financial planner to meet with them and work out a plan. Failure can be a powerful teacher.

When it comes to your elderly parents:

6. Support your elderly parents early

Consider supporting your elderly parents before their money is depleted. Parents are living longer, and in many cases, their funds run out before they pass away, leaving you with the financial burden of looking after them. By contributing a smaller amount early on, you can help extend the lifespan of their retirement investments, delaying the need for more substantial financial support later.

7. Research and compare retirement care options

Many retirees are determined never to move into a retirement estate, often preferring live-in carers. Carers are expensive, and this cost burden eventually gets transferred to their children. Make time to research the costs of retirement or community care homes versus the cost of a live-in carer for yourself and your elderly parents. Consider long-term benefits and make informed decisions.

Being part of the Sandwich Generation is undoubtedly challenging, but finding a balance that supports your loved ones while securing your financial future is possible. While caring for your children and elderly parents may be extremely rewarding, you must make informed decisions. You don’t want your children to eventually look after you if you deplete your retirement savings due to being wedged between two dependent generations. Meet with your financial planner and ensure that your long-term plan for your second chapter includes a fulfilling life for yourself plus provision for any long-term care needs. It is possible to navigate complex situations that balance your responsibilities and financial goals.