The Generation Trap

The Generation Trap

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In days gone by, having a large family was considered insurance against poverty in the parents’ old age.  It was standard practice that all siblings would club together to support aged parents, but in today’s fast-paced world this is not a given, and some siblings refuse, or are unable, to shoulder the burden. Fifty years ago children were considered independent at age 18 and had to fend for themselves financially. Now, a child of that age may just be starting a university course and still be totally dependent on his or her parents.

Sandwich generation

Adults in their 50s are sometimes called ‘the sandwich generation’, as they are stuck in the middle between their elderly parents and their not yet fully independent adult children. This is an age when they expected to be free of responsibilities and to start to enjoy life again as a couple, this time more established than when they first started out. Instead, they find themselves burdened with the task of taking care of aged parents and simultaneously supporting grown children not yet capable of taking care of themselves. These responsibilities take their toll both emotionally and financially,
and can be a huge drain on the resources of the middle-aged couple.

Research shows that this situation is becoming the norm in today’s modern world. Even people who made provision for their retirement find that their pension is now inadequate, having failed to keep up with inflation rates. Medical science has also increased life expectancy, but at a price: spiraling healthcare costs for the aged. These expenses fall increasingly on the shoulders of the middle-aged children, who are themselves struggling to ensure that their own pensions will be adequate when they retire. Yet very few children can ignore their elderly parents in their hour of need, and find themselves taking on the task of supporting them, hopefully with the cooperation of other siblings.

Reciprocal care

Coupled with this extra financial responsibility comes the problem of adult children who still rely on their parents financially. In many cases, this involves paying for their tertiary education and living expenses while they are studying. While this expense may seem onerous at the time, it does tend to pay off in the long term.

Research has shown that this assistance is reciprocal: parents support their children’s education, and children repay the investment in their education by providing their parents with old-age support. This investment-repayment cycle is related to the existence of a rapidly growing national economy, as in the case of South Africa, where the returns on an educational investment in your children can be much higher than returns on savings or any other kind of investments.

As the demand for more skilled and educated workers increases, children with a strong education are empowered to earn nearly three times what their parents earn. Once these educated children secure good incomes, they and their parents together share the returns from the educational investment.

Set the boundaries

Clearly, supporting a child’s education pays off in the end, but it is also essential to know when to stop this support and help the child to stand on their own two feet. Cutting the financial cord has to be done. In some cases it is done gradually, by a slow weaning process. In other, more resistant cases – such as when an adult has been living with their parents for years – only shock treatment will work. It may seem harsh but it’s a case of financial ‘tough love’.

Caring for aged parents is more complex and here the “tough love” approach is obviously inappropriate. Elderly, ailing parents are unable to fend for themselves and now is when they really need you. The best you can do is to give them all the support you can without jeopardising your own retirement too much. Ideally, your siblings will share this mutual responsibility. It’s not easy being in the middle of a generational tug of war, but knowing where to set the boundaries will go a long way in lessening the pull.

Bryan Hirsch
BRYAN HIRSCH has been in the financial services industry for 47 years and is a director of Bryan Hirsch Colley & Associates. He has written two books, the first Bryan Hirsch’s Guide to Personal Finance and more recently, Steps to Financial Freedom. Bryan has written for many of South Africa’s top financial and business publications, has been a weekly guest on Radio SAFM for 18 years, and has his own weekly TV show You & Your Money on Summit TV.