Conversations about intergenerational finances can be sensitive, especially in families where aging or elderly parents view themselves as the primary financial decision makers. But those are conversations that an increasing number of Americans—dubbed the “Sandwich Generation"—are having as they provide support not only for their parents, but also for their own children.
A recent Ipsos survey conducted on behalf of RBC Wealth Management shows one in five Americans are currently supporting an older family member in some capacity, such as helping with cooking or cleaning or providing transportation to and from appointments. In addition, a growing number of Americans provide support that is financial in nature. This includes direct financial support, as well as help with paying bills, investment decisions and taxes.
This same generation is also looking out for its children as they move towards life's milestones, whether they're young and still in grade school, attending college, starting their careers after graduation, or even saving for a house while living at home. According to the survey, 21 percent of Americans are still providing some form of financial support to their adult children over the age of 18.
That added responsibility of helping family members while still managing one's own financial goals can be a lot to handle, says Jen McGarry, head of Risk Mitigation Initiatives at RBC Wealth Management-U.S. in Minneapolis.
“People feel torn; they're wondering, how much do I budget for this while not also sacrificing my own livelihood?" McGarry says. “There's a perceived financial guilt along with the emotional burden of caregiving and figuring out those logistics."
The changing dynamics of intergenerational support can create a number of challenges for the Sandwich Generation, many of whom are approaching their own retirements. It can be dizzying to manage everyone's needs.
“If the Sandwich Generation had unlimited resources, of course they would do everything they could to help," says McGarry. But for most people, caring for their aging parents as well as their children, all the while preserving their own financial well-being, means knowing the right questions to ask and developing a concerted strategy.
Getting to know your parents' finances
To prepare for the possibility of providing financial support for your parents, McGarry suggests taking a family inventory—a comprehensive list of everything pertaining to their finances, ranging from the location of financial records, legal documents, and bank accounts, to the types of insurance they have in place.
“Having that baseline inventory goes a long way toward that conversation about roles and responsibilities," says McGarry.
Tara Ambrose, manager of Senior and Vulnerable Client Initiatives at RBC Wealth Management-U.S., says she'd even encourage members of the Sandwich Generation to attend meetings with their parents' financial advisors to gain a more thorough understanding of their parents' goals. Perhaps their parents subscribe to a certain investing strategy, for example, or maybe they're particularly risk averse in ways that directly counter their adult children's approach to investing.
“It's critical for adult children to understand their parents' goals and what they're planning to do with their money," says Ambrose. “How much do they anticipate leaving for charity or for children? How do they plan to make investments last throughout their years and accommodate their spending needs?"
Talking about uncomfortable subjects
For someone in the Sandwich Generation, broaching the topic of finances with an older family member can be challenging, McGarry says, but there are approaches you can take to minimize the stress for everyone involved.
“Perhaps you don't start the conversation with the topic of money, if that's an awkward and delicate subject," McGarry says. “It may be beneficial to start on a more personal level, appealing to their need to be cared for, discussing their medical and end-of-life wishes." For example, do they want to be cremated? Do they want a funeral service? What does end-of-life care look like for them?
“If the conversation organically flows to the topic of finances and their preference for who should act in what capacity, great, but it might not be the first topic you start with," McGarry adds. “Approach this conversation as objectively as possible, letting your family know you have their best interests in mind. Also, be prepared to address these topics through a series of discussions, if needed."
Ultimately, McGarry says, it may be necessary to turn to a financial advisor to help facilitate that conversation.
Sensing when to step in
An added complication for the Sandwich Generation is cognitive decline, which can have an adverse effect on their parents' lives and force adult children to step in to manage their parents' finances. According to RBC Wealth Management's survey, 10 percent of those with an elderly person in their life say that person has been diagnosed with some form of dementia.
Cognitive decline in an older person can be detrimental to their finances, says McGarry, opening them up to financial exploitation and erratic decision-making that could further erode the money meant for their retirement and long-term care.
She says to watch for behavioral changes in parents, like emotional or personality traits that used to be prevalent but no longer exist, confusion in a typically sharp person, or unkempt appearances. All of these signs can suggest it's time to delicately propose a cognitive assessment.
Catching cognitive decline in its early stages, Ambrose says, may allow you to make the necessary adjustments for financial support.
Supporting yourself so you can support others
For those in the Sandwich Generation, balancing your parents' needs and the needs of your children may be an isolating experience.
“It's natural for someone's initial reaction to be, 'This is on me, or this is on my family to handle,'" says McGarry. “But it's important to emphasize the resources out there that can help."
McGarry suggests seeking support through advocacy groups at the city, county and state levels. “These groups can help educate you and provide connections to sources of funding, information about insurance programs, and any supplementary fund programs that are available," she says.
Your financial advisor can also help you design your own financial roadmap that includes funds specifically earmarked to support your family, whether young or old.
“There is a common misconception that you need to be at a certain 'point' in your life to engage the help of a trusted financial advisor," says McGarry. “At whatever stage in your life when you determine there's a need to set goals, track them and figure out what it takes to get there, it's an ideal time to initiate a relationship."
Ambrose agrees, and says that supporting others shouldn't mean sacrificing your own financial well-being.
“One of the key things I hear from people in the Sandwich Generation is they don't want to put their children in the same position their parents have put them in," says Ambrose. “So, how do they set up their financial situation so that their children don't face tough decisions or added stress? They use this as an opportunity to look at their own finances and come up with a comprehensive plan."
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.