The ‘sandwich generation’ faces tough financial decisions


Talk about pressure. Many Baby Boomers and Generation Xers are feeling it from multiple directions – they may need to help their struggling adult children find direction and a solid financial footing, and care for aging parents with changing health circumstances and needs, as well as keeping their own financial house in order amid the strain and stress of those other demands.

According to AARP, in the past year 56% of adults have provided some financial support for at least one grown child and 54% have provided financial support to a parent! These members of the so-called sandwich generation are discovering that supporting an adult child and/or an aging parent requires an extra level of financial planning.

How can members of the sandwich generation look out for aging parents and adult children without neglecting their own financial obligations, well-being and goals? What steps can they take to relieve the pressure that comes from being the filling in a financial sandwich?

Use the following suggestions as a starting point for answers, then seek additional guidance from a financial planner with expertise in multigenerational issues.

Adult children

Issues and challenges: Grown children today are increasingly reliant on their parents for some form of financial support, whether it is paying off school loans or other bills, providing health insurance, supplementing their income or giving them a place to live. In many cases, parents feel a sense of responsibility for their kids, especially when the kids have done everything right.

Strategies and solutions: So, what is the right way for parents to handle the extra financial burden associated with supporting an adult child? It is important for the parents to communicate openly right from the outset on the extent to which they are willing to help, and for how long, so expectations are clear on both sides.

If the adult child is living in the parents’ home, have them assume some household duties and/or pay rent to give them a sense that they’re contributing in exchange for room and board. If you lend them money, be sure everyone is clear about the terms for paying it back.

It is also vital for the parents to understand how providing support to an adult child impacts their own financial situation, and to balance their own financial needs with those of the adult child(ren) to whom they are considering offering support.

Be careful not to overextend yourself to support an adult child. Don’t be afraid to say no to certain things. For example, carefully weigh decisions such as tapping home equity or a 401(k) for funds to support a kid, because these kinds of decisions can have major ramifications well into the future. A better move might be to tap into the emergency savings fund that you have established – hopefully – for situations such as this.

Aging parents

Issues and challenges: Aging parents bring their own set of circumstances, many of which can place financial demands on their sandwiched kids. In many cases, parents need not only additional, often-costly health care, but also some form of long-term care as they get older. Does that mean they move in with one of their kids? And if so, will the home need costly modifications to accommodate them? Kids may also need to take on a larger caregiving role. But how do you juggle that responsibility with work and other obligations?

Strategies and solutions: As with adult children, discussing money and financial support with aging parents can be very uncomfortable, but is really important. Lay out the top issues: the extent to which the aging parents can contribute financially and otherwise to the household, the kind and amount of support and care their kids are willing and able to provide, and the type of care the parents desire, if and when they need it. Get started by saying, “Let’s talk about it. We don’t have to make hard and fast decisions now, but we want your input on how you want things to turn out.” Let everyone verbalize and vocalize.

Being sure that all of the parents’ key documents are in order, up-to-date and easily accessible – such as wills, insurance policies, bank and retirement account information, powers of attorney, etc. – will also help.

Leaning on outside resources may also relieve some of the pressure. Your financial planner, depending on his/her specialty, may be able to point you in the right direction. And lastly, know that you are not alone.

JASON E. SIPERSTEIN, CFA, CFP, RMA, is the chairman of the Financial Planning Association of Rhode Island, program director for the CFA Society Providence and president of Eliot Rose Wealth Management. He can be reached by email at