Caught in the middle?

What to do if you are in the Sandwich Generation

If you answered yes to the two questions, then you belong to a growing phenomenon – the sandwich generation.

“The sandwich generation” is a term coined by Dorothy Miller in 1981 to describe the generation effectively “sandwiched” between the obligation to care for their ageing parents and dependent children.¹

In a sense, adult children caring for their ageing parents is not something new and has been going on for centuries, so is the situation any different now?

For one, the duration of the dependence. Improvements in medical science have increased life expectancy and people are living longer and are requiring care for longer periods of time.² According to the Department of Statistics Malaysia, life expectancy had increased over time. In year 1960, the life expectancy was up to 59.4 years, while the life expectancy in year 2011, increased to 74.3 years. Due to this, an adult child may require funds to support ageing parents because of the increased life expectancy and the duration for dependence.³

Secondly is the time frame in which this dependence happens. Couples are delaying having children, waiting until later in life. This may leave them in a sandwiched position of caring for their young children and for their ageing parents simultaneously, even as they themselves approach retirement. Not only that, even couples whose children are grown up can end up in the sandwich generation if their children “boomerang” back to home due to the inability to stand on their own  feet, get a job or simply opting to stay with their parents due to the high cost of living on their own.⁴

Members of the sandwich generation who are ill-prepared for this situation may find themselves pulled in two directions when attempting to allocate time and money to their children and parents. They may also feel that they have to sacrifice their own retirement aspirations in order to provide for their dependent parent or child. Beside money, members of the sandwich generation may face a time crunch. The responsibilities involved with caring for two generation of dependents may leave them with very little time to focus on other activities that they may enjoy.⁵

What’s in the sandwich⁶?

The sandwich generation is made up of adults who are supporting their parents and are either raising a child or supporting a grown child. The sandwich generation has the responsibility to provide care and financial support to their parents as well as children.

A survey on the sandwich generation across Asia by the Economist Intelligence Unit shows that one in five working-age Asians is now a member of this generation. The typical member of Asia’s sandwich generation is between the ages of 30 and 45, married, supporting one or two children and their parents or parents-in-law.

Since becoming sandwiched …

• They are working harder, saving less and more cautious with their investments. More than one third of the sandwich generation surveyed had to work harder to cover family expenses; about half have reduced their savings and investments, and nearly two thirds are more cautious with their existing investments than they would otherwise be.

• More than one out of three sandwich generation surveyed say they are “struggling to cope” with the competing demands of their parents and children. Nevertheless, the Asian sandwich generation’s sense of filial obligation remains strong, with 78% agreeing that it is their responsibility to help their ageing parents.

• They are saving for their retirement but 42% expect a reduced standard of living when they leave the work force.

• They spend more time and money caring for children than parents, especially paying for their children’s education. Many expect to continue supporting their children into early adulthood: with as many as half of those surveyed saying they expect to care for their children into their 20s.

Are you a member of the sandwich generation and feeling the squeeze? You do not have to figure it out alone. Talk to HSBC’s Relationship Manager or walk into any HSBC branch for more information on how you can save for your retirement which may consequently help you plan for your retirement and how you can fund your children’s education and provide for your parents.

Help! I am sandwiched

With society’s changing demographics, getting caught in the middle is a possibility. Nevertheless, there is always something you can do to better prepare yourself, should you find yourself faced with the sandwich generation issues. Here are some ways to care for yourself while balancing the responsibilities you have towards your parent or child. The last thing you want is to exhaust your own retirement funds to care for your parents and children. When you keep your own financial house in order you may be in better position to help your parents and children.

• Do not delay planning and contributing towards your retirement.

• In planning ahead and projecting the kind of income you may need for retirement, keep in mind the possibilities of being in a sandwich generation in the future.

• Take into account the increased monthly costs if one or more of your children continue to live with you. You may also want to consider how you would like to support your parents should they be unable to provide for themselves in the future.

• Consider insurance coverage for yourself. During your life you will need to protect your health and make adequate provision for your family, in case something unfortunate were to happen to you. HSBC has basic protection products such as HSBC Lifestyle Protector and HSBC’s HealthPlus which helps to protect against death, Total and Permanent Disability (TPD) and hospitalization.

• Consider education plans that pay out when your children are ready for university.

• You may want to explore ways to enhance your retirement income using products such as HSBC’s Universal Treasure that provides an increasing annual guaranteed income in the form of Guaranteed Cash Payments.

• Face the sandwich generation issue, don’t avoid it. Have “the talk” with your parents – regarding their assets, how they want to live as they age, what kind of health care and lifesaving measures they do or don’t want, and who should make legal and medical decisions for them if they are no longer able to handle their own affairs. Knowing the answers to these questions may help you avoid a lot of financial uncertainties in the future.

• If you are already in the sandwich generation and are feeling the squeeze, the essential thing to remember is to preserve your assets. You may not want to use your retirement savings to pay for your children’s higher education or parent’s healthcare. Your children can consider student loans or scholarships and you may want to use your parents’ own assets to finance their care for as long as possible. Bear in mind that you may not be eligible for any financing facilities after retirement.

• You may consider delaying retirement. Working a little longer may help you support your dependents  without dipping into your retirement funds.

• You may consider trimming your (and your dependents’) expenses to a more manageable level to fit your income.

• Consider clarifying your expectations if you have “boomerang” children returning home. You may want them to be responsible  for specific expenses or share in the overall household budget even though they are living under your roof.

• Even while caring for two generations, do make time for your spouse, have fun and live life to the fullest.

Sources:

1. Investopedia.com, “Sandwich Generation” undated and Encyclopedia.com, “Sandwich Generation” 2003.

2. Economist Intelligence Unit by The Economist, “Feeling the squeeze Asia’s Sandwich Generation” August 2010.

3. Borneo Post Online, “Financial and emotional burden of the ‘Sandwich Generation’” March 17, 2013.

4. Senior Living – About.com, “How to Avoid Sandwich Generation Problems”, undated.

5. About.com, “Sandwich Generation, The Cluttered Nest Syndrome”, undated.

6. Economist Intelligence Unit by The Economist, “Feeling the squeeze Asia’s Sandwich Generation” August 2010. Economist Intelligence Unit surveyed 700 individuals in Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan (100 per country). Survey findings for “Asia” in this report refer to aggregate results across these countries.

July 2014