There has been a recent phenomenon known as the sandwich generation, which refers to working adults who have to support both their parents and children. This in itself isn’t a unique situation, but economic challenges and changing demographics have compounded the financial pressures for the current sandwich generation.
In particular, the rapid economic growth in the post-war years meant that the cost of living far exceeds what the elderly may have planned for retirement. Additionally, retirement and financial planning was not as extensive and accessible back then, with fewer financial instruments available and less exposure to financial literacy. As a result, they depend financially on their children –– the sandwich generation –– in ways more than expected. The sandwich generation thus have the added stress of taking care of both their parents and their children.
Here are some of the unqiue financial problems the sandwich generation today have that their parents didn’t.
#1 Increased Demographic Pressures
Due to the falling birth rates, households today have fewer siblings to share the financial responsibility of supporting their parents. The strain of supporting parents is amplified since there is less people to share the financial pressures with.
Thus, the sandwich generation faces financial pressure pulling in two ways – their retiring parents, and their children’s ever-growing needs – not to mention their own retirement adequacy, lest they perpetuate the problem by becoming overly reliant on their own children in their retirement years.
#2 Increasing Standard And Cost Of Living
The rate at which expenditures are growing is not matched up by the real growth in income.
Based on the last Household Expenditure Survey (HES), Singapore resident households spent an average of $4,724 a month in 2012/13 on goods and services, about 50% higher than the $3,809 monthly spend in 2007/8. On the other hand, household income per household member recorded a cumulative real growth of only about 22.7% from 2013 to 2018.
On top of that, financial needs are also changing. There is an increasing number of expenses, at increasing costs. For parents, the costs in raising a child today are much higher compared to 10 years ago. For example, the cost and demand for tuition, childcare and even hiring a domestic helper have risen.
#3 Higher Life Expectancy And Poorer Health
The average Singaporean’s life expectancy stands at 84.8 years –– the longest in the world. With a higher life expectancy, there is greater financial pressure to save more for retirement since you are budgeting for a longer outlook. For instance, the average life expectancy 20 years ago in 1999 was 77.6 years, which is a difference of about 7 years. Compared to the past, this means you would have to budget and save for about 7 extra years of retirement.
A study also found that Singaporeans are living a greater proportion of their time in ill health. With a general fear of not having enough for medical care after retirement, there is added pressure to increase your savings to prepare for the worst case scenario.
#4 Changing Nature Of Jobs And The Economy
The fast-changing landscape of the economy has resulted in jobs being outmoded or turning irrelevant. This has led to Singaporeans having to reskill and constantly upgrade themselves as their jobs are not always secured and guaranteed. As part of the working community, the sandwich generation may mean need to take extra courses to improve themselves, incurring added expenses to finance these courses. Job transitions and job-hopping may be more common and even necessary, resulting in compounded financial pressures for the sandwich generation.
Some individuals even supplement their household income by entering the gig economy because of job insecurity and the desire to build up their financial buffer. The uncertain nature of the job economy creates further stress and pressure, particularly if you are facing the strain of expenses from both your ageing parents and young children.
The slowing GDP growth has also resulted in increased retrenchment and unemployment rates, with some being a direct impact of the US-China trade wars. With job cutbacks for outward-oriented sectors, PMETs may find the need to take a lower-paying job as they transit into other industries, further adding to the financial problems the sandwich generation are already facing.
What Can You Do If You Are Sandwiched?
For a start, ensure that you have adequate insurance protection for you and your loved ones. This ensures that if anything untoward were to happen, you have a source of financial support for hefty bills and so you have the space to recuperate, without being concerned about the need to earn an income.
You can also begin setting aside savings early and investing it, so you can make full use of the effect of compounding interest. In addition, any discussion of retirement planning in Singapore must include the mandatory CPF system. Examine it to understand how it works, and what actions you can take so that yourself, your parents and your kids can benefit the most from it.
All of Singapore’s government policies are crafted on the basis of self-sufficiency and personal responsibility, but with multiple social safety nets. Thus, you should be familiar with the various grants and schemes you could use to keep yourself relevant for the workplace of tomorrow (such as SkillsFuture), and resources like Workforce Singapore, who provide career coaching and other career-related resources.