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Meeting the Financial Challenges of the Sandwich Generation

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They’ve been dubbed the “sandwich generation” — couples and individuals typically in their 40s or 50s who are faced with the dual financial challenge of raising kids or helping support adult children while also caring for aging parents.

According to the Pew Foundation, at least 15 percent of middle-aged adults are currently providing financial support to both a child and an aging parent. Almost half (47 percent) of adults in their 40s and 50s have a parent who’s 65 or older and are either raising a young child or supporting a grown child financially, according to Pew Foundation research.

Roughly the same percentage (48 percent) of these middle-aged adults have provided some financial support in the past year to at least one grown child, with about a quarter of them (27 percent) providing primary support for this child. And about one in five of them (21 percent) have provided financial support in the past year to a parent who’s 65 or older.

Characteristics of the Sandwich Generation

The Pew Foundation research determined that most members of the sandwich generation (71 percent) are between ages 40 and 59. Only 10 percent are age 60 or older and just 19 percent are younger than 40. And the more affluent individuals and couples are, the more likely they are to be members of the sandwich generation.

Not surprisingly, meeting the financial challenges of the sandwich generation appears to have an impact on these individuals’ and couples’ financial well-being. Forty-one percent of members who have children and aging parents but don’t provide their parents with financial support say that they are comfortable financially, but only 28 percent of members who do provide financial support to parents say they’re comfortable financially.

Interestingly, members of the sandwich generation are more likely to provide financial support to a grown child than to an aging parent, the Pew Foundation research found. Almost three out of four (73 percent) adults in their 40s and 50s say they have provided financial support to a grown child in the past year — and more than half (57 percent) say they are providing primary financial support to their child.

Set Financial Priorities

So what are some strategies to help members of the sandwich generation deal with the financial and emotional challenges they face? The first step is to set financial priorities — and these priorities should start with yourself.

Often, individuals and couples prioritize the urgent needs of their parents or children over their own financial needs. This is especially true in the area of saving for retirement. For example, if a grown child needs help paying off college loans or meeting daily living expenses, or a parent needs help paying assisted living expenses, these needs appear to be more urgent than saving for their own retirement, which could still be decades away.

However, postponing retirement savings now in order to help cover expenses like these for grown children or parents can backfire down the road by possibly putting your children in the same situation you’re in now. While it can be hard to say “no” to adult children and parents asking for financial assistance, this is exactly what many member of the sandwich generation need to do.

Open the Lines of Communication

Open and honest communication is critical to setting financial priorities and having successful conversations like these. Adult children need to know what they can and can’t expect from their parents when it comes to financial support so they can plan their own budgets accordingly. And aging parents need to tell their children what their true financial situation is — their assets, liabilities and expenses — so family members can work together to devise the best financial solutions for everyone.

Based on the results of these conversations, you, your adult children and your parents can create a financial plan that details how you will be able to help them given your own financial priorities and what their specific financial responsibilities will be. Having this plan in place will provide structure for everyone and let children and parents know what level of financial support you’ll be above to provide to them.

If you have more questions, please give us a call. We’d be glad to help you deal with the financial challenges of the sandwich generation.


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