Between a rock and hard place? South Africans join the Sandwich Generation

Urgent need for educated financial planning and collaborative family savings plans

Old Mutual launched the lastest findings of theirSavings Monitor which shows that 23% of South Africa’s working population now falls into the Sandwich Generation, way higher than people in first world economies like the USA/Canada (around 14%), UK (10%) and Japan (6%).

The Sandwich Generation Is the generation of people squeezed between their own children and their ageing parents, and supporting both of them.

Some of the causes of the pressures are parents’ increased life expectancy – despite poor health, the fact that many folk are starting families later, or have children who are staying at home longer, or coming back home to live after embarking o­n their working careers.

At the start of the 20th century, around o­ne in20 people in their 60s had a living parent. Today that figure is nearly 50%.

In 1990, fewer than o­ne-third of young adults, aged between 18 and 24 years, lived with their parents. Research shows that today 69% of South Africans between the ages of 18-24 live at home. The figure for those aged 25-34 is a staggering 45%.

The Sandwich Generation has the daunting task of balancing the needs of their children and parents, with their own need to work and earn enough money to support themselves now – and after retirement.

It’s small consolation but we are not alone in this. A recent study by the Economist Intelligence Unit (EIU), “Feeling the Squeeze, Asia’s Sandwich Generation,” states that in Asia "More than o­ne-third ... have had to work harder to cover family expenses since becoming 'sandwiched', about half have reduced their savings and investments and nearly two-thirds are more cautious with their existing investments than they would otherwise be.”

The picture in the USA is similar – even though a smaller proportion of the working population falls into the Sandwich Generation, a majority of those who do claim to have reduced savings or spent savings to cover living expenses, while roughly half have failed to make at least o­ne rent, mortgage, credit card, car loan or student loan instalment over the past year.

And there’s a further wrinkle. Some of us belong to the so-called “Club Sandwich Generation”. As the name implies, this is a more complicated situation, with people aged 50+ sandwiched between aging parents, adult children and grandchildren, and younger people in their 30s and 40s with aging parents and grandparents, and children.

As the Old Mutual Savings Monitor shows, there has been a small improvement in South Africans’ savings habits since the financial crisis. But there is still a marked need for people to save more effectively.

Taken as a whole, the research is indicating that the Sandwich Generation is in urgent need of assistance:
* At the very least, they should be encouraged to adopt a careful and collaborative approach to financial planning, taking a generational view of the whole family’s needs
* Children and parents (of all ages!) need to have a realistic grasp of what the future may bring
* Investors must avoid dipping into retirement savings, no matter how pressing the temptation is to do so, and
* They must work with competent financial advisers to be able to make objective decisions and informed choices.

Says Lynette Nicholson, Head of Research at Old Mutual, “The key is to establish what your current financial situation is and ascertain what additional financial obligations you may need to be responsible for in the future. With this understanding, it is a priority to formulate a realistic achievable financial plan that will afford you the peace of mind and financial security that we all seek. The best way to do this is to get expert financial advice.”