The sandwich generation

Planning for family needs while keeping your financial goals on track

Members of what has been called the "sandwich generation" cope with balancing their own needs with the needs and expectations of their family. Current research shows that 44% of Americans between the ages of 45 and 55 have living parents or in-laws, as well as children under age 21. Many of these individuals are direct caregivers, with 64% of caregivers also employed full-time or part-time.

Within the next decade, the population over age 65 will continue to grow, according to U.S. Census reports. Increasing life expectancy also means that more people are likely to have chronic health problems and family involvement in their care. Today, an estimated seven to 10 million adult children provide long-distance care and assistance for their parents,² and approximately 92% of boomers financially support an adult child in one or more ways.¹

The current economic crisis demands that we all learn to be more financially responsible. The sandwich situation calls for open interfamily conversations to help ensure that money is managed thoughtfully and effectively as well as cooperatively. It also means staying aware of your own financial plan when it comes to the increasing costs of medical care for your parents and college for your children.

Generous boomers, tenuous retirement

Exactly how to teach children about money is a dilemma many parents face, according to the Ameriprise Financial New Retirement Mindscape^® study: 52% of those surveyed said it was the advice they needed most.

In fact, some baby boomers are concerned about how the support they give their grown children may impact their own golden years, according to Nathan Dungan, president and founder of SHARE SAVE SPEND, an organization that helps people of all ages develop and maintain healthy financial habits.

Although they have these concerns, only 29% of boomers think that helping their adult children is slowing down their retirement savings — a key finding of the Ameriprise Financial Money Across Generations^® study. One reason they don't see the impact on their retirement savings may be that they are tapping into day-to-day spending money and not dipping into retirement accounts to fund their children's needs. But could some of that money be put toward retirement?

Money talks

Discussing finances can be complicated because each generation thinks about money and the need to talk about it with other family members in different ways that have been shaped by their upbringing and societal norms. An 86-year-old patriarch, for example, probably has a much different view of debt than do boomers or their children. He may question why his 28-year-old grandson uses a credit card to buy new clothes even if he's already carrying debt.

Although money can be a sensitive subject, good things happen when families discuss money. It's important to approach the conversation in an open, non-judgmental way. While finances are a taboo subject for many reasons, "harmony can be realized through understanding and communication," Dungan says. In some cases, families may find it helpful to include a neutral third party, such as a financial advisor, to act as a facilitator.

Take Ruth, for example, a 59-year-old widow who supports her two adult sons. Ruth's financial advisor told her, "Let's deal with this now, or you're going to be making some really tough choices in five or 10 years," Dungan recalls. "You need to tell your children you can't be their sole source of financial support."

The best way to avoid these complicated situations is to do what may seem uncomfortable: Talk honestly about money. According to Dungan, no matter how you do it, what really matters is that you start the conversation and keep it going. "The money thing, from my perspective, is as much, if not more, about communication as it is about money," he says.

Boomerang children

The U.S. Census Bureau estimates that 80 million households have an adult child living with his or her parent(s). While many may still be in school and have not yet moved out, others have returned home believing they can't afford to live independently because of high housing costs, college debts or job loss.

Consider these tips to help you transition your adult child into financial independence:

• Have an agreement that spells out the living arrangements and household responsibilities.
• Be clear about what financial responsibilities children will have when they move back home (e.g., paying rent or a portion of utility expenses).
• Require that children make specific progress toward paying down debt and adding to their savings.
• Encourage your children to have a financial plan. It will help them develop good financial habits for a lifetime.
• Agree on a departure date.

Creating a plan of action

Family financial support is often complicated and difficult. It requires a more planful approach, especially now when portfolios have been adversely affected by all the changes in the market but there is hope.

A comprehensive financial plan can help you feel more in control. In fact, a national Value of Financial Planning Study³ shows that people with a comprehensive financial plan are more on track with their goals and feel more confident about their financial future.

Your financial advisor can help you determine what financial needs you will have based on your own goals and unique family situation. For instance, you could consider investing in a 529 plan for your children's or grandchildren's college expenses, or purchasing long-term care insurance for your parents. You may also need to think about other health-care expenses and estate-planning issues with your parents.

Your advisor can help guide you and your family through these issues and decisions while helping you keep your own retirement planning on the right track. If you don't have a financial advisor, contact us at (800) AMERIPRISE or find a financial advisor in your community.