The inter-generational financial squeeze


An ageing population is bringing with it a range of challenges with significant implications for our family lifestyles, family finances and family relationships.



Australian architects are winning awards for multi-generational housing – creatively designed for elderly parents and an adult child's family to live in close proximity. An appreciation for the need for privacy and harmony between generations yet with a degree of interdependency are presumably critical requirements in the architectural briefs.

And researchers along with the media are focusing more on the so-called "sandwich generation" and an emerging demographic category, sometimes termed as "dual retirement generations". These classifications may require some explanations.

Members of the "sandwich generation" may be edging towards their retirement yet still providing at least some financial support to their adult children (or perhaps younger children) as well as to their elderly parents.

The dual-retirement phenomenon is said to occur as two generations of the same family are simultaneously in retirement. And no doubt demographers will come up with a catchy way to describe families where two generations (parents and their offspring) are in retirement yet the third generation is not yet financially independent.

In the almost two years since Smart Investing first discussed the sandwich and dual-retirement generations in the one piece, these twin patterns and their impacts have presumably gathered pace.

This reflects, in part, the waves of older baby boomers joining or soon to join their elderly parents in retirement, greater longevity and a tendency to have children later in life (meaning more parents will near retirement with still dependent children).

Further, high housing costs mean that members of the sandwich generation may still be paying off their homes until relatively late in their working lives yet their adult children may seek financial assistance from the "bank of mum and dad" to buy their first homes.

The Pew Research Centre in the US reports that almost half of Americans in their forties and fifties have a parent aged 65 or older and are raising a young child or financially supporting a child over 18. And 15 per cent of middle-aged adults provide financial support to both an ageing parent and a child.

"...the financial burdens associated with care for multiple generations of family members are mounting," according to this research. "The increased pressure is coming primarily from grown children rather than ageing parents."

It is, of course, critical for members of the sandwich generation not to neglect their own needs to build a solid financial base for retirement in their well-meaning efforts to help their elderly parents and their adult children.

Practical ways to assist elderly parents include ensuring that they are receiving their government entitlements, offering to help them budget efficiently and helping them to obtain suitable accommodation given their age and health. And you can try to protect them from the fraudsters who sadly target the elderly.

A Vanguard opinion piece, published several years ago, emphasised the need to respect "your parents' financial boundaries" when talking with them about their finances. It can be a sensitive issue that needs handling with care.

Similar sensitives obviously exist when talking about money with adult children who perhaps want financial assistance to buy their first home.

Individuals in the sandwich generation may benefit from consulting a financial planner about how to deal with their inter-generational financial challenges given their circumstances and their own financial needs.


Robin Bowerman
27 November 2016


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