5 Money Strategies for the Sandwich Generation


Generation X is commonly called the sandwich generation for two reasons. First, they are sandwiched between the Millennials and the Baby Boomers, both groups that seem to hog media coverage — and marketing budgets. More importantly, many Gen Xers face the modern problem of caring for their elderly parents while still also caring for their own children. (See also: 6 Ways the Sandwich Generation Can Get Ahead)

Being in the sandwich generation can be stressful and financially draining. Here are five strategies to stay financially afloat if you're caring for others.

1. Talk Openly About Finances

Whether your elderly parents live with you or not, it is important to know where they stand financially. For families that didn't grow up talking about money, this might feel awkward. However, it is important for you to be prepared to assume financial responsibility if anything were to happen.

Of course, it is best to have this talk with a certified financial planner and estate attorney, as well. There are a lot of financial matters to discuss.

  • Who has power of attorney?
  • Where will the funds for your parents' care come from?
  • Should your parents be receiving veterans' benefits or Medicaid assistance?
  • Do your parents have any investments, and are they making the best rate of return on them?
  • Do your parents have long-term care insurance or enough retirement savings to cover care costs?

2. Utilize Special Savings Accounts

Money will be tight when you are caring for your parents and children at the same time, but don't neglect saving accounts. Contribute as much as you can to your retirement account and even look into a 529 plan for future college costs.

Many employers offer flexible spending accounts (FSAs), which allow you to contribute up to $2,500 into a health account and dependent care account. If both you and your spouse are employed, then you might both be eligible to contribute $2,500, for a combined $5,000. This money can be used for your own medical costs, your kids' medical costs and care needs, and your elderly parents' medical and care needs, if they are declared as your dependents.

An elderly parent can be financially taxing, but don't let that cause you to avoid saving for your retirement or your child's college. You don't want to be stuck in a financial black hole once your elderly loved one is gone.

3. Get Tax Benefits

If you do declare a parent as a dependent, make sure you get all of the possible tax benefits. Talk with a tax specialist about getting special deductions for medical home improvements, medical expenses, and care expenses.

4. Prioritize the Budget

Take a look at your budget and see what can be cut or put on hold. You might have to move to a more affordable area or forgo family vacations for a few years. Being in the sandwich generation will take sacrifice, but if you can survive this time without incurring debt, then you will stay financially afloat.

If you need extra money, try to sell unwanted or unneeded items. Every little bit helps. If either your child or parent is capable of earning some money with a part-time position, this can help too. A teenager can get a job and take over their cellphone or car payments, and your parent can help contribute to the grocery budget. Even if this only adds up to an extra $100 a month, it can still create a little bit of breathing room.

5. Ask Other Family Members for Help

An aging parent shouldn't fall on the shoulders of just one person. Siblings and other able family members should help financially and physically. Have a serious talk with your other siblings and family members about contributing. If they cannot contribute financially, then they should be able to watch or care for an elderly parent at least a few hours a month to give you a break.

Don't try to balance the weight of aging parents and children alone. Start by talking with a financial adviser, who can help put your finances in order and point you to free resources. It can also help to seek advice from peers who have gone through or are going through the same situation.

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Guest's picture

I totally agree that the sandwich generation is facing a lot of challenges, particularly with their finances.

This generation is known to be pressured to raise and help their children while they support their aging parents with their long term care needs. They are in a difficult position and now and can use all strategies they can to stay financially afloat.

This is a very comprehensive list of strategies that the Sandwich Generation can use. I think they should explore tax benefits more. Tax breaks for caregivers are often overlooked, and since it’s still tax season, they can explore tax deductions from expenses not covered by insurance like preventive care, treatments, vision care, surgery, insulin, dental care and more. I also read a post from ALTCP.org that they can also get tax breaks by providing care for their aging loved ones provided that they can prove that they are their dependents and they are shouldering at least half of their living expenses.

I hope this information can help those who are doing itemized deductions and about to file their income taxes.