Financial considerations for the sandwich generation
It’s quite possible that you’ve never heard of the term ‘the sandwich generation’, but it is the name given to an ever-increasing group of Australians. A group that you might well be a part of!
As our population ages, more and more people find themselves providing support for their ageing parents while also caring for dependent children. These people are part of the sandwich generation and there are an estimated 1.5 million Australians who find themselves juggling these family responsibilities.
If this is you, then we know and understand the challenges you face. There are many emotional factors that influence your decisions. You want to be able to give your parents all the help they need to make sure their golden years are free from worry, but you also have to make sure your children remain a priority.
Unfortunately, this is where you can end up overextending your finances and creating more difficulties for your own economic future… which can lead to the next generation being in the same sandwiched position in years to come.
“The sandwich generation often carries the financial weight of two generations — planning is essential to avoid burnout and long-term strain.”
Your own financial situation
At the moment, you might be in a position to offer some financial support to your elderly parents. Maybe you have equity in your home, or you have investments that you could sell to free up some funds.
On the other hand, maybe you want to help your children buy their first car or even put money towards their home loan deposit. You are emotionally drawn to help… but it’s vital that you consider your own financial situation and future goals before you make any decisions. Your retirement depends on your financial security and every dollar you give to someone else now could impact your stability in the future.
Especially when you assess the benefits of compounding interest. The more you have in investments such as superannuation today, the more likely you are to have enough income to last throughout your retirement.
We aren’t saying that you shouldn’t help your family, we just believe it’s important not to over-commit yourself. Make sure you have a clear understanding of your current position and then you can determine how much support you can provide without sacrificing your future.
Government support
Financial support is available from the Government, so it’s worth making sure that your elderly parents are receiving all their relevant entitlements.
If they have previously been looking after their own finances, it’s possible that they might not be across the most current support packages. You can help them by contacting Centrelink and assessing whether they have additional eligibility.
This is especially important if their situation has recently changed.
During the assessment process, you could also review whether a carer’s allowance would be applicable… whether for yourself or one of your parents.
The additional payments could be all the extra support they need to alleviate any financial strain.
In addition to financial support, there is a range of government-funded services available to older Australians. Your parents might be able to access help at home, short-term care or other types of care via the My Aged Care website.
Insurance
When it comes to the kids, you might feel as though the ‘Bank of Mum and Dad’ is always open. And while this makes sense when your children are still at school, it can continue well into their early twenties. It’s not uncommon for young people to think that their parents will financially support them if something happens… like if they have an accident and are unable to work.
Of course, you will want to help your children when something bad happens… but it could create an extra financial load that can affect your financial stability and retirement plans.
One option that is available would be to purchase insurance cover on behalf of your adult children. In this instance, the children are the insured, but the parent is the policy owner and pays for the insurance premiums.
If something were to happen, then the insurance payment would provide the necessary financial support. This can be a far more economical option rather than giving them access to your bank account or an additional debit card. Plus, it provides you peace of mind knowing that your children will be looked after without any detriment to your own financial situation.
“Supporting family today shouldn’t come at the cost of your own financial security tomorrow.”
Professional advice
We know that family financial matters can be difficult to navigate. The last thing you want is additional stress and conflict. If you find yourself unsure of how to move forward without jeopardising your own wealth, then we recommend seeking professional advice.
A third-party perspective can often ease some of the strain and provide an objective solution. If you’d like to talk to one of our team, please contact us today.
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
Financial Pressure Is Often Temporary, but Planning Is Essential
Without a clear strategy, short-term support can lead to long-term financial setbacks.
Clear Boundaries Protect Financial Health
Setting limits on financial support helps protect your own cash flow and retirement plans.
Retirement Shouldn’t Be Sacrificed
Maintaining super contributions and long-term savings is crucial, even while supporting others.
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Frequently Asked Questions
Who is considered part of the sandwich generation?
The sandwich generation refers to people who are financially supporting both their children and their ageing parents at the same time.
What financial pressures commonly affect the sandwich generation?
Common pressures include education costs, mortgages, daily living expenses, aged care costs, healthcare expenses and saving for retirement.
How can the sandwich generation manage competing financial priorities?
Creating a clear financial plan, setting boundaries, budgeting carefully and prioritising long-term goals can help manage competing demands.
Why is retirement planning still important for the sandwich generation?
Delaying or neglecting retirement planning can create future financial stress. Maintaining superannuation contributions and long-term savings remains critical.
Should financial advice be considered?
Yes. Professional advice can help balance family support, tax efficiency, cash flow management and future financial security.
What is the “sandwich generation” and why does it create financial pressure?
The “sandwich generation” refers to people who are supporting their children while also caring for ageing parents — often at the same time. This can create financial pressure because you may be juggling household costs, school or uni expenses, and retirement planning, while also helping parents with medical costs, living expenses, or aged care decisions.
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