Financial Planning for the Sandwich Generation

Making the right choices when supporting adult kids and aging parents.

Your children can be your rock. Your parents can be your rock, as well.

What happens if you get caught between them?

Nearly one-quarter of all adults are in this position: caring for both their children and their aging parents simultaneously. These adults, aptly referred to as the “sandwich generation," might find themselves juggling a new list of responsibilities, including healthcare and housing decisions.¹

For many of these millions of adults, the situation is sudden and without a game plan. After all, few people plan to have a conversation with their parents about their healthcare coverage and savings, or with their children about their “Plan B” if they don’t find a job.

Only 32% of the sandwich generation have even talked about future financial needs with their parents.²

Common sandwich missteps, and how to roll around them

It’s not surprising that 29% of the sandwich generation is “very stressed.” Taking care of kids and parents at once can be taxing financially, physically, and emotionally.³

These stressors can lead to decisions that are more rushed than under usual circumstances. Based on our experiences with clients, as well as those of our own wealth management bankers who have children and parents, there are several areas where missteps are more likely.

Misstep: You take it on all at once.

Roll-around: If you’re in a sandwich situation, you likely feel like you’re being pulled in a lot of directions all at once. Take a beat. Write out the issues that need to be addressed by priority and an estimated cost for each. Look into community resources that can help, as well as your own job benefits.

Misstep: You don’t set up a realistic budget based on realistic needs.

Roll-around: Familiarize yourself with your parents’ savings, spending habits, and healthcare coverage before a crisis hits. Take baby steps. Start the conversation by speaking about your own financial situation. Then you can methodically line up the elements of a flexible plan. If you are able to save more, do so, but wisely, because you may need to access those savings quicker. We can help you customize a financial plan based on your needs and comfort level.

Misstep: You assume healthcare is covered.

Roll-around: Ask specifically about your parents’ medical insurance – the provider and plans. Many forms of health insurance, including Medicare, do not cover long-term care. You can help your parents (and growing kids) get ahead of unexpected healthcare bills by opening a health savings account (HSA). An HSA is like a typical savings account, but it’s earmarked expressly to pay for medical expenses, and has the bonus of being tax-exempt.⁴

Misstep: You prioritize your children’s education over your retirement.

Roll-around: Remember: it’s easier to borrow for college than for your own retirement. Use a cost formula for balancing how much to put into your kids’ education against how much to invest in your own future. Then get your kids involved. High school students can start saving money from their first jobs in accounts designed just for them. Meanwhile, you can consult an expert to map out how much to save each year to ensure a good retirement plan.

Misstep: You don’t delegate.

Roll-around: If you have siblings or other close family members, establish the expected roles of each in parental care. These roles can be aligned with professional expertise and access – a family member may be exceptionally detail-oriented, for example. These designations can ensure different needs are in the right hands, such as steps for managing trusts and estates. If your children are old enough, include them as well.

3 ideas for the sandwich generation

These missteps are common for a reason; be honest with yourself as you approach the risk areas.

1. Communicate, communicate, and listen. Plan “the talk” to avoid being blind-sided, but start small. With aging parents, ask first about health insurance – a common topic. This can lead to discussions about their end-of-life expectations, what their finances can cover, and assets. With children, ask if they plan to go to college and where, and explain what you plan to contribute.
2. Manage expectations: Make your financial guardrails clear. For parents, they might apply to deciding on independent living or assisted living. For kids, it will be college and work. If children choose a college that costs more than your agreed budget, tell them they will have to finance the difference. Also, lay out their options if they don’t get a job right after college.
3. Don’t forget about yourself. Look, most of us strive to save what we can to cover a lot – college, retirement, a home, emergencies. Set limits, and revisit them from time to time. And also budget time for your hobbies, relationships, and personal time. You have to be real with yourself, and others, about what you can do.

Where to turn to for advice

Being financially sandwiched between parents and kids can lead to double the stress, so seek help for yourself before helping them. If you know someone with expertise – such as your banker or financial advisor – they can serve as access points.

You can start with a familiar face or reach out to get help from financial planning professional you can trust.

Financial planning takes big-picture thinking, and anticipation. If you’re curious about building a step-by-step strategy to manage your life needs, as they unfold, contact our Yellow Cardinal Advisory Group to help with a personalized approach.

1 “Caregiving and the Sandwich Generation,” Mental Health America, https://mhanational.org/caregiving-and-sandwich-generation

2 "29% of the sandwich generation is ‘very stressed’ about financially supporting their aging kids and parents,” By Myles Ma, Policy Genius, Jan. 4, 2023; https://www.policygenius.com/life-insurance/sandwich-generation-survey/

3 "29% of the sandwich generation is ‘very stressed’ about financially supporting their aging kids and parents,” By Myles Ma, Policy Genius, Jan. 4, 2023; https://www.policygenius.com/life-insurance/sandwich-generation-survey/

4 To open an HSA an individual must be 18 years of age or older and must be enrolled in a qualified high-deductible health plan. You also must not be enrolled in Medicare, claimed as a dependent on someone’s taxes or have any other health coverage except what is permitted by the IRS.

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