What to do if you’re part of the Sandwich Generation
At some point in life, you may be expected to financially support both your children and parents. But there are ways to make sure your resources don’t get spread too thinly between all these important people in your life.
Stuck in the middle with you
According to 2019 statistics published in the Old Mutual Savings and Investment Monitor, 63% of South Africans expect that they will need to support their parents when they are old. There are both cultural and financial reasons for this. Firstly, it’s an accepted practice in some cultures and families that children will one day look after their parents. But the research also shows that the lower the household income, the greater the number of people who have this expectation. If this looks set to become your responsibility and you are concerned about making ends meet, you are not alone. Basic costs are climbing and debt is on the rise. Lack of employment and high accommodation costs keep school leavers at home for longer. At the same time, the population is ageing: seniors are living longer and are finding that their pensions or savings are hopelessly inadequate. All this means that those in the middle have increased financial responsibilities. Long-term goals, such as property purchases, take a back seat, with the immediate need of keeping your loved ones going taking centre stage.
SA's high dependency rate
The sandwich generation phenomenon is worldwide – a Pew Research Center study in the US showed that one in eight Americans aged between 40 and 60 supports their children and parents. In South Africa, a 2013 study by the Institute for Race Relations found that every employed South African supports 2.8 people, which is considered a high dependency rate, says research manager Lucy Holborn. On average, employed white people have 1.4 dependants, whereas employed black people support 3.2. Many support more: those who are the first in their families with tertiary education and the prospect of a well-paying job feel a responsibility to the family, which might include parents, siblings, grandparents and extended family members.
Here are four ways to mitigate the financial impact of extended family responsibilities:
1. Get advice
Find a financial planner who can help you prioritise expenditure and create a savings programme.
2. Be transparent
While you might not be comfortable to discuss your parents’ financial situation with them, there’s nothing wrong with letting your children know what you can afford and encourage them to contribute where they can. And if your parents are open to ‘The Talk,’ try getting an idea of their financial status before you become responsible for their affairs.
3. Think ahead
Can your parents afford home care or a retirement home? Will you have to pay for it, or do they plan to move in with you? Find out what resources there are in your area and what they cost.
Make sure their wills (and yours) are up to date and that they have living wills – a document explaining how they’d like to be treated in certain medical situations, for example, on life support. It is also a good idea to ask them to sign a power of attorney, just in case.
To be legal, it has to be done while they are still of sound mind. Have all account numbers and policy documents safely filed.
4. Care for yourself
There are many demands on you, so take time out now and then to recharge your batteries. You will be stronger for those who need you.
How to prepare yourself
It may be hard to find extra money for savings, but it is essential to keep building up your pension fund or retirement annuity fund to prepare for the road ahead. Hugh Hacking, general manager of operations at Old Mutual Corporate, recommends putting away 15% of your salary from the very first pay cheque.
‘The way to go is to do it by “stealth”,’ says Hacking. ‘Start by saving 10%, for example. The next year, up it to 11%. It will take you a month to acclimatise to the extra percent but if you try to go cold turkey and put away 15% or 20% out of the blue, that’s when it becomes unmanageable.’
Hacking also urges you to arrange a debit order that goes off before anything else: ‘Don’t wait until the end of the month and hope that there will be something left; there never is. Think about your salary as whatever’s left after you’ve saved.’