What is the sandwich generation? Maybe you’ve often heard this term on various social media sites. Though derived from the name of a food, this term actually refers to financial conditions faced by a certain demographic. Who are they? What characterizes them? Are you one of them? Find the answer and the full discussion in the following article!
What is the Sandwich Generation?
Despite its unique and funny-sounding name, “sandwich generation” actually relates to a person’s financial condition. “Sandwich generation” is a term for those who are financially caught between two different generations. Those belonging to this generation must take care of the financial needs of the generation above them (parents or grandparents) and also the generation below them (children or other descendants).
Just like a sandwich, this generation is like the meat and vegetables sandwiched between two layers of bread. From this explanation, can you already identify yourself as part of this sandwich generation?
Subtypes of Sandwich Generation
Members of the Sandwich generation can be categorized into several subtypes. We explain each of them below:
The Traditional Sandwich Generation
This group has to take care of the needs of elderly parents who are no longer working in addition to the finances of children who are not working despite having entered their productive age. Therefore, this group is usually in their 40s to 50s.
The Club Sandwich Generation
The second group typically includes people in their 30s to 60s. The needs of children and parents must be borne by this group, as well as those of their grandparents if they are still alive and/or grandchildren if they already have them. The financial burden faced by the club sandwich generation is heavier than the previous group because they have to bear the needs of 3 to 4 generations.
The Open-Faced Sandwich Generation
This type is not age- or relationship-based. This group refers to those who are involved in the care of the older generation.
5 Tips for Managing Finances for Sandwich Generation
You already know about the sandwich generation and the subtypes within it. The sandwich generation faces a bigger challenge in managing finances, since they are responsible for not only their own needs but alsothe older and younger generations. The sandwich generation also tends to work harder or longer to earn enough to meet the needs of dependents.
How can the sandwich generation manage their finances effectively? Here are some tips.
1. Positive Cash Flow
The first thing to note is financial cash flow. Make sure your expenses are less than your income. If your current income is not sufficient for you and your dependents, it’s time to find a job or a side business. This may be exhausting, but your income will increase.
In addition, you also need to reduce expenses to save money. Don’t get caught in consumer debt that is difficult to pay off.
2. Make a Priority Scale
Managing the finances for multiple people is not easy. You need to be disciplined in making and complying with the priority scale of needs. Estimate the costs for each type of expenditure. It doesn’t stop there—once you make a budget, you also have to stick to it. Avoid spending money on impulse shopping or tertiary needs. Prioritize the basic needs of all dependents.
3. Build Healthy Communication
Financial arrangements cannot run smoothly without the cooperation of the people you are responsible for. Therefore, you need to communicate with your parents or children. Be open about your income. Also, let them know what various daily or monthly expenses must be made. Explain to your parents and children the budget for each expense, and with good communication, you can get support from them.
4. Discipline: Set Aside Money to Invest
Meeting current needs is indeed important. However, don’t forget to consider your future needs. Regularly setting aside money for investments is key. You need to prepare a retirement fund. That way, you no longer need to depend on your children to meet your needs.
Instill this mindset in your children or future generations so they won’t need todepend on you financially forever. Teach them the skills necessary for financial independence.
5. Choose the Right Type of Investment
Do not randomly choose an investment instrument. Pay attention to what your investment goals are and whether they need to be achieved in the short term or long term.
If you need to take care of your needs in less than three years, you can choose short-term investments such as money market mutual funds, P2P Lending, or time deposits.
However, if you have goals to be met 5 years or more into the future, use a long-term investment. Examples are gold, stocks, or cryptocurrencies.
The sandwich generation does need to put extra effort into financial management. Ensuring positive cash flow and discipline on the priority scale is key. Investing can also be a way to break the sandwich generation cycle. We hope these tips for wise financial management will be useful to you!