The new sandwich generation: Generation X and their overwhelming financial obligations

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The new sandwich generation: Generation X and their overwhelming financial obligations

The concept of the "sandwich generation" -- adults who are financially, emotionally and physically caring for both their children and aging parents at the same time -- isn't new. In fact, it's been around since the 1980s. And now, many Generation Xers, which generally refers to people born in the period between the early 1960s and early 1980s, are entering that stressful period of their lives.

However, our new sandwich generation faces challenges that their predecessors didn't have to deal with, including a job market that has many children moving back home after college and savings depleted by the Great Recession. Furthermore, the fact that many Gen Xers had or are having children later in life, and that Americans now have longer life expectancies (Americans now live to 78.8 years on average, compared to 73.7 in 1980), means that people are being "sandwiched" later in life than before.

Bad news about Generation X

According to The Pew Charitable Trusts, the average Gen Xer is earning more than his or her parents did at the same age. The bad news, though, is that Gen Xers are falling behind in terms of wealth (factoring in assets such as savings accounts, retirement accounts, homes, vehicles and more).

One potential explanation for this paradox: the amount of debt Gen X is carrying compared to previous generations. 97 percent of Gen Xers owe student loan, medical, credit card or another form of debt, and according to the Pew study, their totals are far outpacing what their parents owed, even after accounting for inflation. That debt is apparent among Credit Karma members age 35 to 54 too:

  • 42 percent of Credit Karma members in this age group have auto loan debt
  • 23 percent have student loan debt
  • 41 percent have mortgages

Another huge factor: Gen X was hit especially hard by the Great Recession. Another Pew report shows that Gen Xers lost 45 percent of their wealth between 2007 and 2010, the biggest hit of any generation affected.

The result is a generation that feels insecure financially. U.S. News & World Report notes that 37 percent of Gen Xers don't feel financially secure, and 1 in 5 believe they'll never get to retire. Forbes also notes that 57 percent of "women in the sandwich generation reported that they were behind in saving for their retirement."

What the Sandwich Generation looks like

If you're a member of the sandwich generation, your experience may look very different from someone else's. You don't need to have three generations under one roof to qualify.

Being in the sandwich generation simply means you're providing support to both parents and kids at the same time. This could mean paying your mom's nursing home fees while also paying your kid's cellphone bill every month. It can mean feeding and clothing your kid while contributing to an emergency savings fund for your parents. It could even mean investing time -- doing laundry for your parents, tackling some repairs around their house and helping your kids with homework all in one day.

Beyond the financial realities of it, being a member of the sandwich generation also means you're a committed and giving parent AND child, so it's something to be proud of, even if it's adding extra stress to your life.

How to make ends meet

It probably won't be easy. Here are a few things to keep in mind if you're part of the "sandwich generation" now or might be in the future.

1. Plan ahead: Like with anything financial, consider getting a head start if you can. Think about talking to your parents and make sure you know where they stand financially, so their situation will be less likely to surprise you down the road. Also consider setting clear expectations with your kids about how much you think you'll be able to contribute to their college education, and plan accordingly.

Friends and family who have been through similar situations may also be great resources. These are the people you can go to for advice, and they may be able to help you with everything from emotional support to figuring out whether long-term care insurance might be a good idea for your parents.

2. Adjust your budget: You may have to adjust your spending habits to account for the extra expenses. This is where planning ahead can become so important. If you start adjusting your budget beforehand, you may be able to get a head start so that the change won't be a sudden shock to your lifestyle. Any cushion you can provide yourself with ahead of time may be a huge help.

For many, it's not as easy as cutting out indulgences -- real priorities have to be set between competing (and important!) expenses like college savings, retirement savings and more immediate costs.

Retirement savings can be an important priority because neglecting to save for your own future could just set your kids up for an identical situation to yours. Some kind of emergency fund may also be a priority. If you're already being stretched thin, consider saving some extra money in case of an unexpected accident or health problem.

After you set your new budget, think about checking back periodically to fine-tune.

3. Ask for help: Don't just assume you have to go at it alone. If you have siblings, it may make sense to talk to them about your parents' future before it becomes a financial problem. But if it's too late for that, it can be helpful to communicate the stresses you're under rather than simply suffer in silence.

There are also several online resources you can access if you're feeling overwhelmed. For example, the free Lotsa Helping Hands tool can help you build your own caregiving community. You can also use to see if your parents might qualify for certain federal or state benefits.

Bottom line

Raising children is tough enough as it is. Add in the stress (and expenses) of an aging parent, and it's easy to get financially and emotionally overwhelmed. Do your best to get prepared ahead of time if you can, and keep being the great parent, child, sibling and friend you already are.

About the author: Mike Goldstein is Copywriter at Credit Karma. Since joining the team in June 2013, he's been delivering the financial know-how on the daily. When away from work, you can find Mike watching hockey, Twittering for hours and frequenting trivia nights.

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