Managing finances for the Sandwich Generation

About a quarter of Americans are part of the sandwich generation, a group of adults who are financially supporting their children while also helping their aging parents with finances and health issues. Men and women are equally stepping into this role, usually while in their 30s and 40s, according to a 2023 New York Life survey.

Though caregiving can be a positive experience, nearly half of those survey respondents say it has impacted their personal finances. Many report contributing less (or nothing) to their retirement and emergency savings, taking on more debt, or cutting back on expenses while juggling care for their parents and kids.

But undermining your own financial security can lead to more problems, said Cameron Huddleston, a journalist and author of “Mom and Dad, We Need to Talk,” a book that helps adults communicate with their aging parents about finances.

“You’re only going to perpetuate that cycle, and your own kids are going to need to step in later on and perhaps support you if you don’t have the resources,” said Huddleston, who provided care for her mother while raising three young kids with her husband.

If you find yourself in this demographic, there are ways to help your parent and ensure your own financial security in the process. 

Create a family budget

If you’re thinking about moving your parent into your home or financially helping in some capacity, go through your current budget. Or create one by calculating your take-home pay and listing your recurring expenses. If you have funds left over after covering your bills and having a little bit of spending money, earmark those funds for savings or debt payoff.

Now, figure out whether any of your expenses will increase or if you need to add new line items after your parent moves in. Then talk with your parent about whether they can fill those gaps or find other ways to contribute to the household finances. While asking Mom to pay rent might not go well, Huddleston said, it’s perfectly acceptable to ask her to chip in for groceries, utilities or gas money.

“They would have been covering those costs anyway in their home, and they’re saving money already if they’re not paying for a mortgage anymore or paying for the upkeep of a home,” Huddleston said.

Consider the cost of care

Parents usually need to move in with their adult kids because of some type of medical issue. Depending on what they need help with, you might be able to handle it yourself if you’re already staying at home to care for young kids. 

But if you and your partner both work or the parent needs more advanced health care, you’ll need to consider how you’ll cover the costs. 

The least expensive option is enrolling your parent in adult day health care, where they receive social and health care services in a group setting. Nationally, families can expect to spend $2,058 a month on this type of service. Hiring a home health aid is another option, though it triples your costs — $6,292 per month on average. 

Some caregivers may be able to leverage their parent’s assets to cover these expenses. For instance, Huddleston sold her mother’s house and used the proceeds to pay for home-based health care services. “I knew this would be the best way to stretch her resources out as much as possible and care for her,” Huddleston said. 

Alternatively, people with very limited resources may qualify for Medicaid benefits. In some states, Medicaid may even pay you to act as a caregiver for your aging parent. The American Council on Aging provides a list of Medicaid’s home and community-based services by state on its website. 

You can also reach out to any Council on Aging chapter near you for a list of resources or information about adult day health care and home-based care.  

Fund your savings

Stashing money away for your retirement and emergency savings can help secure your financial future, so it should be a non-negotiable expense in your budget. First, try to set aside three to six months’ worth of expenses in a dedicated emergency fund. This account can help you cover bills and living expenses during a financial emergency, like a job loss.

If your workplace offers a 401(k) or similar retirement plan, contribute enough to secure any company match that’s offered to you. Then consider increasing your contributions as much as possible. 

You can also deposit pretax money into a health savings account (HSA), and later use those funds in retirement for qualified medical expenses. 

If you don’t have access to a workplace retirement plan or you want to save beyond the annual contribution limits, consider opening an individual retirement account (IRA) or a regular brokerage account.

Get financial documents in order

While it might be uncomfortable to discuss health and financial matters with your parent, it’s a crucial part of caretaking. First, make sure your parent adds beneficiaries to all financial accounts, such as bank accounts, retirement accounts, life insurance policies and annuities. 

Your parent may also decide to grant you durable power of attorney, which allows you to handle their finances and make medical decisions if they cannot. Another legal document, a will, allows your parent to distribute their property and other assets after their death.

Some of these documents have to be drafted and signed while your parent is still mentally competent. If there is memory loss, it doesn’t mean it’s too late. Huddleston suggests speaking with an elder law attorney for guidance.  

She offers another pro tip: Make sure your own documents are in order while you arrange your parent’s finances.

Seek support when needed

Getting logistical and emotional support can help you prevent mental burnout and financial stress, so it’s an important step. 

Start by talking with your siblings or other family members. If they live nearby, ask them to drive Mom or Dad to their doctor’s appointment, cook meals or stay with your parent while you take a vacation. If they don’t live near you, ask them to chip in financially. And for small favors, consider reaching out to good friends or asking for volunteers at your place of worship.

It’s also important to realize you’ll need to make trade-offs, since “you can’t give 100% to all the people who are counting on you,” Huddleston said. Those trade-offs might mean hiring someone a few days a week to watch your parent or having a conversation with your boss about adjusting your work schedule. 

“Remind yourself it will be temporary,” Huddleston said. “It’s going to be tough for a while, but there’s a light at the end of the tunnel.”