During a recent conversation with a former colleague, he openly shared with me that he was worried about the financial situation of his parents, especially as it related to healthcare needs and costs. His parents, both in their late 70’s, were struggling with medical issues. Sadly, his mother was recently diagnosed with Dementia.
He also told me that did not know the exact amount of money his parents had or would need, but he suspected they did not have much saved. His father had shared with him on a prior occasion that they did not have a large “nest egg,” and they were relying on social security for most of their living expenses. He knew that his parents did not have long-term care insurance.
Although his parents owned their home, their property taxes were very high and they “did not want to move.” He admitted “occasionally” helping his parents pay their credit card bills so they did not carry a high-interest balance.
I remembered that he had children, but I couldn’t remember how many. He reminded me that he and his wife had three children, ranging in age from 14 to 20. The oldest was in college, and their middle child was applying to colleges. He shared that they were covering their oldest child’s college costs, but were concerned about being able to pay for his other two children.
When I asked about his financial situation and goals, he said he and his wife had a “fair amount” of savings but only had a relatively small amount set aside for emergencies, and were unsure if they would ever have enough to retire comfortably. Neither he nor his wife were clear about her parents financial situation, since they were “very private people.”
He and his wife paid an advisor for a financial plan “about five years ago” but a lot had changed over the last few years and that original plan definitely didn’t contemplate parental care beyond a “few monthly expenses.”
Our interaction motivated me to write about his circumstances as a member of the “sandwich generation,” and offer information to help younger adults begin considering and preparing, as needed, for this situation.
If you are interested in learning more about the sandwich generation, what it may cost you to be part of this cohort, and a few tips for navigating your membership, then please read on.
What is the sandwich generation?
The sandwich generation refers to middle-aged adults, typically in their 40’s or 50’s, who are responsible for caring for both their aging parents and their own children. They are “sandwiched” between the needs of two generations. This role often involves providing financial, emotional, and physical support to both groups.
Nearly one in four US adults are part of the sandwich generation.
Even if you are not part of this generation now, you may be some day. Sandwich generation caregivers are twice as likely to report financial difficulty than other caregivers, so figuring out the potential impact to your household finances is very important.
Child and parental care costs
In my book, I share the costs and opportunity costs for deciding to raise children. According to the Brookings Institution, the average middle-income family with two children will spend over $310 thousand to raise a child up to age 17. This amount can be significantly higher depending on where you raise the child and for how long, and does not include higher education costs.
I also mention the need for you to talk with your parents and in-laws about their life goals and plans for funding retirement and healthcare costs as they age.
If your parents need long-term care, how will they pay for it? Do they have long-term care insurance? The average monthly costs for assisted living are $5,350 per person, but can vary depending on your location and level of service required.
Only 11% of adults say they have a private long-term care insurance policy, including 14% of those ages 65 and older. This means there are a lot of sandwich generation families that may need to provide some level of long-term care for their parents.
What can I do now?
You may have a good handle on your family’s household expenses, but be unclear on your potential parental care situation.
If you haven’t already done so, I recommend that you speak with your parents and in-laws about their financial needs and plans. Your parents were probably raised to believe that you don’t talk about money with your children, so this may be an awkward conversation but it is necessary. If you need some help preparing, then I recommend reading an article like this one from Forbes: You Really Need To Talk To Your Parents About Money: Here’s How.
The goal of this conversation is to discover any potential parental care costs that will impact your life and financial goals.
Sandwich generation info sheet
To help you learn more about the sandwich generation and what this may mean for you, I created a two-page information sheet which can be downloaded as a PDF file.
