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You’re at a point where your kids and your aging parents are both counting on you for financial support. Meanwhile, you still have monthly bills to pay and long-term goals like retirement to save for. Welcome to the not-so-exclusive club called the sandwich generation. Let’s explore some of the unique challenges of this life stage and steps you can take to help overcome them.

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What Does the “Sandwich Generation” Mean?

The term “sandwich generation” was coined in the 1980s by sociologists Dorothy Miller and Elaine Brody to describe people in their 30s and 40s who were “sandwiched” between the responsibilities of caring for their children along with their parents or extended family members.

As people live longer and more young adults struggle to “launch” into financial independence, 23% of U.S. adults are now part of the sandwich generation. Americans in their 40s are still the most likely members: More than half (54%) have a living parent age 65 or older and are either raising a child younger than 18 or have an adult child they’re helping financially. But 36% of those in their 50s are now in this situation – and the child they’re assisting is more likely to be an adult than a minor.

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The Financial Pressures of the Sandwich Generation

With financial pressures coming from multiple directions, members of the sandwich generation have a lot on their plates. And the squeeze they may be feeling is compounded by the often-staggering costs of elder care, childcare, college education and other expenses.

Consider these numbers:

• Median national costs for long-term care services include more than $120,000 a year for a private room in a nursing home, more than $70,000 a year for an assisted living community and $34 an hour for a home health aide.
• The average cost of college has doubled this century and is now $38,270 per year (for private schools, add another $20,000+).
• The average weekly daycare cost is $343, and parents say they’re spending 22% of their income on childcare expenses.
• The estimated cost of raising a child for 18 years is $297,674.

These financial realities are straining parents’ wallets and impacting their lifestyles – 78% of family caregivers for older adults report having related out-of-pocket expenses. To afford childcare, 33% of parents say they dipped into their savings, and 89% of them had to make at least one major change to their work, life or finances.

And the bills are just part of the cost. Caring for older relatives and children often takes a physical and emotional toll on members of the sandwich generation. A recent study found that sandwich generation caregivers reported significantly higher levels of burnout than caregivers of children alone.

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Key Wealth Planning Challenges

While the challenges you face as a member of the sandwich generation may not last forever, they can have a big impact on your financial plans and goals – now and down the road.

In the shorter term, tighter budgets could restrict cash flow and make it more difficult to reserve cash in an emergency fund. We recommend having at least six to 12 months reserved at minimum during your working years. But without that cushion, an unexpected curveball – from a job loss to a home repair – could put your finances more at risk.

The cost of caring for multiple generations could also limit your ability to save for retirement, especially if you have to reduce your hours or take time away from work to focus on caregiving responsibilities. It can mean retiring later than expected or having to play “catch up” to make up for savings shortfalls.

Finally, being in the sandwich generation can make estate planning more complex. Not only do you have to think about your wishes for your children, but you might also be responsible for handling your parents’ financial affairs toward the end of their lives and managing the arrangements they’ve made. You may have to have conversations about naming beneficiaries or legal decisions like powers of attorney and health care directives.

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How to Help Protect Your Wealth as a Sandwich Generation Caregiver

Caring for both children and aging parents may feel like a tall enough order. But you can’t forget to take care of the middle of the sandwich – you! ��Here are some steps you can take to help improve your financial health as you’re taking responsibility for others:

Create a multi-generational financial plan

When you’re in the sandwich generation, your life and your money are closely tied to the generations above and below you – and your financial plan should reflect that. A multi-generational financial plan can coordinate goals across all three generations, covering retirement planning, long-term care, estate planning, education funding and wealth transfer strategies. A coordinated approach can help ensure you balance priorities, share responsibilities and preserve wealth across generations.

Prioritize your own retirement savings

To be at your best for those who rely on you, it’s vital to take care of your own financial needs first. That includes doing whatever you can to keep funding your retirement at a level that allows you to get a full company match (even if it means lowering your contribution rate temporarily) and avoid tapping into your retirement savings early or taking 401(k) loans. Remember, no one else will fund your retirement for you. And if you don’t plan now, you risk becoming a financial burden on your kids later.

Use tax-advantaged accounts

Yes, money can be tight when you’re supporting both kids and parents. But tax-advantaged accounts – like 529 plans, health savings accounts and IRAs – can help you stretch every dollar and save more efficiently for life’s biggest expenses. A 529 plan lets your savings grow tax-free as long as the funds are used for qualified education expenses. An HSA helps you set aside money for medical needs with triple tax benefits – tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified health care expenses. And IRAs are essential for building retirement savings with tax advantages. Using these accounts can help reduce your tax bill now or in the future, freeing up more money for family needs.

Explore long-term care insurance options

Remember those long-term care expenses we mentioned earlier – like an assisted living community or a home health aide? Medicare only pays for a portion of these types of services under certain unique circumstances. And employer-sponsored or private health insurance plans generally cover the same limited services as Medicare. For many, long-term care insurance can be a solution.

Unfortunately, it may be too late for your parents to get affordable long-term care insurance coverage – it gets more expensive the longer you wait, and your health plays a role in your eligibility and possibly the premium. But when you’re in your 40s or 50s, it’s a good time for you to consider it. It can help preserve your independence as you get older and help you avoid becoming a burden on your own kids in the future. In other words, it could help prevent them from being “sandwiched.”

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Strategic Tips for Balancing Competing Financial Goals

Here are some ways careful planning, a bit of research and open communication can help make balancing competing financial goals a little easier – and less stressful.

Budget for dual-care responsibilities

Outline your financial responsibilities in a detailed budget that accounts for both child-related and elder care expenses. Categorize spending into needs vs. wants and look for areas to cut or consolidate – even if it’s just for the time being. If possible, set aside a dedicated fund for unexpected care costs, automate savings and review your budget as your needs shift.

Seek financial and caregiving support

You don’t have to do it alone. Have open and honest conversations with siblings and other family members about sharing both financial and caregiving responsibilities. You can also explore government and community resources designed to help, from tax credits to respite care programs, which provide short-term relief for caregivers in a variety of settings. Look at your workplace benefits as well. Your employer may offer a dependent care FSA, a flexible spending account that lets you use pre-tax dollars to pay for eligible dependent care expenses – which can include both childcare and eldercare – so you can work.

Talk to a financial advisor

When you’re juggling multiple goals and responsibilities, an experienced advisor can help you set priorities, create a personalized plan and connect you to specialized guidance on topics like estate planning, tax planning and insurance. You can also lean on an advisor to help facilitate family discussions and act as a neutral third party.

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Take Care of Your Loved Ones – And Yourself

Whether you’re in the thick of the sandwich generation now, or you can see it coming soon, remember that successfully balancing responsibilities isn’t just about making smart financial choices. It’s also about caring for yourself and getting the help you need – from your family, your community and financial professionals. A financial advisor can talk through your situation and develop strategies to face competing priorities with confidence.��