Raising children is well known to be an expensive endeavor. Equally, caring for parents in later life can cause enormous financial strain. For the sandwich generation – those who are managing both, concurrently – it can feel that your finances are being pulled in too many directions at once. Wealth planning can help to identify solutions specific to your situation.

What do we mean by the ‘sandwich generation’?

Generations ago, adults would typically have their first child in their early 20s, while their own parents were in their 40s. Grandparents usually had an active role in raising their grandchildren, removing some of the childcare responsibilities from parents. Only when children were fully grown would their grandparents reach old age and begin to need more help from the generation in between, to meet their household, health, and emotional needs.

But, as lifestyles have changed, it’s now common to delay having a child until your late 30s or 40s, when perhaps your parents have already reached their retirement years. Rather than helping to care for young children, grandparents may instead need additional care themselves.

This leaves a growing number of people in middle age who are ‘sandwiched’ between two generations, both of whom rely on them for everyday care and financial support.

Is this a new problem?

Of course, adults have always tended to have some responsibility for various other family members, and the idea of caring for the elderly as well as the very young has always existed. But there are several multiplying factors that make the sandwich generation’s situation different.

As parenthood has begun to occur later, average family sizes have grown smaller, meaning that the workload of caring for elderly parents, which once was split between numerous siblings, often falls on the shoulders of just one or two adult children. Single parenthood and divorce are more common, so older people may not have a spouse for support.

Simultaneously, life expectancies have grown, resulting in retirements that commonly span many decades. And the age at which society deems someone an adult has risen, with many parents continuing to support their children financially well into their 20s.

How does this affect your personal wealth?

It’s clear to see how supporting children into their 20s or 30s, while also caring for parents into their 80s or 90s, can put pressure on a person’s finances.

But the implications go even further. The hours of time spent on family care can be significant, affecting career development and earning potential. Increased stress can have a similar impact.

With less disposable income across several decades, members of the sandwich generation will often neglect their own savings, meaning that they never reach similar levels of wealth to previous generations of their family.

How can wealth planning help?

Managing your finances as a member of the sandwich generation requires a bespoke solution based on your specific needs and goals. Thinking about the following points may help:

1. Budget realistically

Look at your monthly incoming and outgoing money and identify where savings can be made. After allowing for your expenses and other financial priorities you may still have money left over to support other family members - but you need to know how much is there.

2. Plan ahead

The cost of caring for elderly parents can increase dramatically in later life, due to medical and accommodation expenses. Anticipating these costs and putting a plan in place is essential to help their money (and anything you’re able to contribute) last a lifetime.

Likewise, if you would like to help cover the cost of further education for your children, the best way to do this is to start saving as early as possible.

3. Take inventory

Both the older and younger generation may need some assistance with managing the money they have. It may be helpful to review their statements and documentation (ensuring you have their permission for a review, or a Power of Attorney is in place), and to know the details of their income and expenditure. If they are overspending on what they can afford, this problem needs to be identified and addressed.

4. Talk openly

While it can be uncomfortable to start conversations around sensitive topics, such as estate planning and power of attorney, a wealth planner can help you to do so objectively. Avoiding these issues can be costly, as well as emotionally draining.

5. Save consistently

It can be tempting to neglect saving for the future to put more resources into whichever issue you are currently facing. This will, unfortunately, only push the problem further down the line, and potentially leave you struggling later. A good financial plan prioritises your future wellbeing by cutting avoidable expenditure today.

6. Review regularly

What works for you and your family now won’t necessarily continue to work in the future. Children’s needs can change very quickly as they progress through different life stages, so your financial plan needs a degree of flexibility to manage these changes, and regular reviews to make ongoing adjustments.

7. Create a safety net

While products such as income protection and life insurance can seem like unnecessary expenses, the support they provide in a crisis can be invaluable. Since there are so many options on offer, it’s vital to select only the cover that you need, while not leaving yourself overly exposed.

8. Reduce stress

It’s unrealistic to expect yourself to manage three generations’ finances and will only add to your feelings of stress. Speaking to a regulated, professional Financial Planner will help you to look holistically at your financial position and also help you to identify solutions you may not be aware of, avoid costly mistakes, and prioritising the right goals. If a family member requires financial advice encouraging them to speak to a regulated Financial Planner may also provide them with a clearer view of their financial situation.

Please note, The Financial Conduct Authority does not regulate advice on Estate Planning, lifetime cashflow planning and legal arrangements such as Power of Attorneys.

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