People who are part of the ‘Sandwich Generation’ are possibly facing the toughest challenges in this economic climate as they work to take care of both their own children and their parents.
Some may also be experiencing a new challenge of older ‘boomerang children’ who are moving back home after years of independent living, mainly due to financial setbacks such as divorce, retrenchment, or business failures.
Those considered to be in the Sandwich Generation are typically Gen Xs between their mid-40s and 60s and millennials between their late 20s and early 40s. They are wedged between two generations who rely on them for financial support: Boomers in their 70s and 80s, and Gen Zs in their teens and early 20s, or younger children.
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Theunis Ehlers, director at Citadel Fiduciary, says the Sandwich Generation typically has more financial responsibilities than the generations before it, largely because of how society functions today as well as the escalating living costs in South Africa.
“Today we pay for everything – schooling, medical care, security, and everything else; fuel costs much more than it did in the 1980s and earlier. We’ve also been paying Capital Gains Tax since 2001, and the financial crashes and recessions of the past 20 years have also had an impact on wealth accumulation.”
Daryl Coker, advisory partner at Citadel, says inflation is rising and living costs of all kinds are going up. People are also living longer.
If you are taking care of two generations, you need to have those hard conversations with your dependents about what you can and can’t afford.
“And you must accept certain compromises in your life, to ensure that you can invest enough for your own old age. This is the reality of life today.”
Those who are part of the Sandwich Generation may find that the following stories or scenarios resonate with them. And if so, Coker offers advice:
1. Divorced man with two sets of children
John* is 48-years-old. He has older children from his first marriage and young children from his second marriage, so is paying both university and pre-school fees. His older children also want cars.
Coker’s advice: You must have financial conversations with your children to ensure that they understand your financial situation. Ideally, your adult children need part-time jobs so that they can earn their own spending money and contribute towards the household expenses or fuel. Don’t create a culture of entitlement that you will pay for everything. Teach them self-sufficiency early on, and imprint on them to choose a field of study and career that will enable them to take care of themselves one day.
2. South Africans who have parents with high medical expenses
These parents typically worked for the same company for 40 years, bought their life insurance policies from door-to-door salesmen, and retired with a good pension. However, they never supplemented their income after retirement. They may or may not have medical aid, are living longer and typically find it hard to pay their medical bills into their old age.
Coker’s advice: If your parents don’t have medical aid, they may need to ensure they have another option, or be aware that they may have to utilise the public healthcare system. I had a client who incurred severe financial stress on his asset base after his elderly parent ended up in a private hospital for an extended period without medical aid.
He believes that today’s economically active adults should learn from the retirement mistakes of the generations before them.
“Retirement is a concept that was introduced in the 20th century for military veterans, and it’s a challenging ideal for most people in today’s financial reality. If you don’t have enough retirement savings, it’s best to carry on working into old age while continuing to invest your money wisely.
“Don’t plan to retire in the traditional sense – find a second career that can help to sustain you.”
3. Woman taking care of her new husband’s family
Mary* is 55-years-old. She tragically lost her family in an accident and is now the breadwinner for her new husband, his unemployed children, and his elderly parents who lost a chunk of their savings to a scam.
Coker believes transparency is the key in this situation.
“Have clear and open financial conversations with your dependents to inform them of your financial limitations and boundaries. If you accept the responsibility to take care of everyone, also make it clear that they need to compromise on certain luxuries. It may also mean that you must compromise on large expenses such as a new car every few years or regular overseas trips so that you can make your money last. Regardless of your dependents’ demands, it is essential to keep putting money aside for your old age – no-one can tell you otherwise.”
* names changed