What is it?
The term nuclear families refer to two generations living under one roof, while the term sandwich generation refer to persons who are caring (emotionally, physically and / or financially) for their ageing parents as well as their own children. The generation in the middle is sandwiched between their parents and their children. These multi-generational households are increasing in number, and the burden is beginning to fall on younger persons to such a degree that many persons between the age of 18 and 30 years are expected to care for their parents. In other words the rate of dependency on those who are employed is growing.
This is a global phenomenon. Presently in South Africa about 32% of households are multi-generational. This trend is expected to continue upward as apart from older parents moving in with their children, adult children are also moving back home with their parents. This is a result of the weaker economy, job shortages, tax and interest rate increases, electricity and petrol price hikes which increase the general cost of living. Apart from the aforesaid, in South Africa we also have the added burden of families supporting extended family.
As an adult your communal life generally commences when you are one of a couple. In time you become part of the nuclear family when you have children. Raising a child comes with its normal rearing expenses as well as tertiary education.
If the time should then arrive when you are also responsible for your parents, some re balancing needs to done which will in all likelihood impact all the generations involved.
This inevitably means that your own planning will be neglected. This also means that you must avoid the urge to raid your own retirement investments to support others.
To minimize the stress and anxiety that can occur prepare early and have plans in place if you need to care for aging parents while also trying to launch your children into adulthood.
If you are not already part of the sandwich generation you will know someone who is.
Needless to say life happens but in many cases the sandwich generation would not find themselves where they are today if they and/ or their parents had sound financial understanding and began earning, saving and investing at a younger age. In order to break the cycle it is imperative to teach children about budgeting and money from an early age. The earlier the better.
Pros of multi-generation households
- Shared expenses, cost effective and convenient.
- Increased lifespan of aging parents can further develop strong long term family relationships.
- Children are cared for by their grandparents which means that no or little provision has to be made for aftercare, child transport, au paring, supervising homework and projects or meal preparations.
- Grandparents enjoy fullfilment and renewed purpose as well as having a secure lifestyle in their old age.
- Alleviates financial and time pressures for parents.
- Peace of mind for adults that their parents are being properly cared for.
- Sharing of fixed costs and pooling of finances.
Cons of multi-generation households
- Can cause family conflict.
- Interference between parents and children’s relationships.
- Tension if finances not managed properly.
- Limited privacy.
- Larger nest egg could be necessary for the provider of the accommodation, especially where the other parties involved cannot contribute.
Suggestions to alleviate problems
- Open and honest communication lines at all times.
- Careful and considerate planning and management.
- Recognizing that each generation has a key role to play and balancing the needs of all.
- Clear ground rules agreed upon in advance and upfront decisions regarding contributions/payments as well as chores and duties.
- Make sure everyone has some private space.
- Respect each other’s time.
- Make time for your spouse away from the family.
As indicated above try and stay on track with your own financial planning. Allow the financial planner to help guide you towards finding some balance between life’s competing priorities. Continue to focus on saving for your own long term financial goals by developing a sustainable retirement income plan which takes cognisance of draw down rates, rates of return, inflation and longevity.
Proactive planning will help reduce the financial stress. Where possible, everyone must have a financial plan, the aging parents, the children and those stuck in the middle. The earlier, the better.
Ensure that the following is in place:
- Financial and medical powers of attorney.
- Estate plans, wills and trusts.
- Insurance – medical aid, life, disability, and income protection.
- Inventory of assets and where important documents are located.
- Consider a multi-generational financial and succession plan that prioritises everyone’s needs.
- Legal and tax planning issues to be taken care of.
By Eugène Antak
Sources: Personal Finance and Old Mutual Savings and Investment Monitor 2018