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Caring for parents and children? Advice for the sandwich generation

22 June 2017

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

Many people approaching retirement with elderly parents and adult children are feeling the pressure on their time and finances. Find out why it’s important to put your own wellbeing first.

Thanks to the twin trends of growing life expectancy and rising house prices, more and more people are finding themselves joining the ranks of the sandwich generation. Recent estimates put the number of Australians in the sandwich generation at more than 1.5 million1. That’s a lot of people juggling the responsibilities of aged care, child care and often a job too.

According to a study by the University of Adelaide for the Productive Ageing Centre, sandwich generation carers are often providing financial support as well as their time and care. Each year more than $50 billion2 is transferred between the generations, with around a third of those surveyed handing over payments of more than $10,000 to family members needing support3.

While it’s all very well to offer ad hoc handouts to your KIPPERS (Kids in Parents’ Pockets Eroding Retirement Savings) or help parents pay aged care bills, it’s important to ensure you don’t end up facing financial hardship in the future. We spoke to Casey Shaw, CFP® and Financial Adviser at Blueprint Wealth about some of the issues faced by the sandwich generation and steps they can take to safeguard their financial future.

If you’re in the sandwich generation, where should you draw the line between financial security for yourself and others?

When it comes to helping anyone in your family with their finances, you need to think of the safety announcements you hear when you’re travelling on an aircraft. It’s important to put on your own oxygen mask first before you help others with theirs. In others words, you’re not going to be much help to your children or your parents if you can’t support yourself effectively.

If you hand over money to your children now, for a wedding or a home deposit, you may be giving up the assets or savings you need for a secure retirement income. When your gift isn’t considered as part of an overall financial plan, you could end up having to ask your children for a handout or become the one needing a room in their home.

Kids may also get into the habit of relying on the Bank of Mum & Dad, giving them a sense of financial security that will always be there for them. When the time comes for you to use your money or assets in a different way, by selling an investment property where your child has been living for example, they might struggle to start paying their own rent or find the money to put a deposit down on their own home.

What sort of financial goals should be a priority for people in the sandwich generation?

If you’re approaching retirement, mortgage reduction is often an important goal. Having a large balance remaining on your home loan can mean making earlier withdrawals from your super to keep up with repayments or to pay off the loan completely. And that can take a big chunk from your retirement savings at a time when you want to keep them invested to earn compound returns and maximise your potential for having enough income to last throughout retirement.

There are lots of other aspects of your retirement plan that shouldn’t be ignored. So when you’re thinking about helping out parents or children with their finances, don’t take it for granted that you’re always going to have enough for your own needs. It all depends on when you’re planning to retire, what sort of regular income you’re going to need and what assets you already have, including your super savings. It may well be possible for you to make a regular or one-off payment to family, but it’s wise to make sure you can do so and still look forward to a secure financial future when you’re no longer earning a salary.

What sort of support or advice might help a person when their time and finances are stretched by providing for their family?

Whether you’re supporting family out of affection or a sense of duty, there are likely to be a lot of complex issues, emotions and relationships involved. A financial planner can act as an intermediary to support you in your discussions and present your options in a more objective way. If providing for yourself and your family are equally important goals, a planner can help you look at ways to achieve one without sacrificing the other.

One approach some parents have taken is to take out insurance cover on behalf of their adult children. Some young adults feel safe in the knowledge that Mum and Dad are their safety net if they fall ill, suffer an injury or die and don’t feel the need to arrange insurance cover. This can leave parents taking on a significant financial burden when the worst happens, particularly when there are grandchildren needing ongoing care and financial support. Knowing you’ll get a payout to help you look after the next generation can give you peace of mind that your family will be provided for, no matter what the future holds.

Whatever your family situation, a CERTIFIED FINANCIAL PLANNER® professional can offer valuable advice on preparing for a secure financial future, for you and those you care about most.


1 Sydney Morning Herald, “A generation caught in the middle” Kate Jones, 11 September 2013, “While there is no official data from the Australian Bureau of Statistics, experts conservatively estimate there are upwards of 1.5 million sandwich carers across the nation.”

2 Sydney Morning Herald, “A generation caught in the middle” Kate Jones, 11 September 2013, “Each year an estimated $50 billion is transferred between generations, according to the study.”

3 Sydney Morning Herald, “A generation caught in the middle” Kate Jones, 11 September 2013, “A third of those reported handing over payments of more than $10,000 to family members needing support.”