How to juggle your financial needs with those of your kids and aging parents

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Balancing financial priorities between you, your kids and your parents
People in their 30s, 40s and 50s are trying to balance sometimes-competing financial goals. These insights may help.

Key points

  • Caring for aging parents, while also caring for any children you might have, creates financial and other pressures you need to plan for
  • While it's natural to want to help your parents, make sure doing so doesn't derail your own financial goals
  • Be open with your loved ones about the kinds of help you can offer and make sure it's very clear what other family members can and can't do to help out
The idea of the "sandwich generation" — people squeezed by financial and other pressures from both their aging parents and their children — has been with us for years. And even those without kids can feel the challenges of keeping their own goals on track while helping care for older relatives. Now those who are currently in their 30s, 40s and 50s are feeling those pressures on a scale their predecessors never knew.

Why this generation is feeling the pressure

People in their late 30s, 40s and 50s tend to share several characteristics that heighten the challenges they're facing.
  • They tend not to be from large families. Born during a period of declining birth rates, the current "sandwich generation" often has comparatively fewer siblings with whom to share responsibilities of caring for their parents.
  • Their parents may be divorced. Census data show that among men between the ages of 64 and 75 who have ever been married, 14% are divorced and not currently remarried. For women in that group, it's 19%.Footnote 1 That means when this generation reaches the age at which they're likely to need extra care, fewer of them will have a spouse to help provide it. And if both parents need care, adult children could end up managing support in two residences at the same time.
  • They're late starters. Many parents delayed having children until later in life than in previous generations. This leaves them facing the responsibilities and costs of child-rearing well into their 40s and even their 50s — weighing day care options for young kids as they also consider elder care options for their parents.
  • There are more single parents now than in previous generations. Single parenting can add a number of financial pressures — including potentially having to cover the cost of a mortgage or rent, utilities, and groceries with only one income.
  • Their parents are living longer. Though life expectancy has dipped in the last two years, mostly due to the pandemic, people are enjoying longer lives compared with previous generations. That means people may be caring for their parents for a longer period of time.
If you're feeling pressure between your parents, your kids and the financial challenges of daily life, communication is critical. Here are some questions you should ask yourself and family members — and some approaches that may help.

1. What are your needs?

Before you sit down to figure out what kind of assistance you can provide your parents, the first step is to assess your own situation. If you can establish boundaries between what you want to do and what you're able to do, that will help you avoid surprises later on, says Christopher Vale, senior vice president, Digital Advice and Investment Solutions at Bank of America. Consider these factors:
  • Your emergency preparedness — Do you have at least six months of living expenses set aside to tide you over if a crisis were to arise?
  • Your retirement — If you have access to an employer's retirement plan, are you contributing as much as you can? Ideally, you should contribute at least enough to get the full employer match (if any), and try to save at least 10% of your salary (including company match) if you can afford it. If you do not have access to an employer's retirement plan, are you maximizing your annual contributions to an IRA?
  • Your cash flow — Do you have a handle on your monthly income and fixed expenses? Once you have a clear idea of your cash flow needs, you can figure out how much is left over to help you care for your loved ones.

2. What are your kids' needs?

Children can be expensive. If you have kids, your finances may be pressed even before you consider whether you have the resources to help out aging parents. And, of course, having children means you may not have as much free time as you'd like for, say, helping out your parents with household chores.
Before you commit to helping your parents, be sure you've thought through the costs of childcare and saving for college tuition. It can be tough to find the extra cash for a 529 plan, but doing so when also trying to help support a parent is that much harder.

Strategies for paying for childcare and education

It's a catch-22 for many parents nowadays — to afford the high cost of raising children, you're likely to have a full-time career. But if you put in all those hours, you may have to hire someone to take care of the kids, pushing your expenses even higher. Richard J. Polimeni, head of Education Savings at Bank of America, suggests you talk with your tax advisor about whether these suggestions might stretch your dollars:
  • Flexible spending accounts. If your employer offers one, the government allows employees to put up to $5,000 per year (unless you are married filing separately, in which case the limit is $2,500) of pretax income into a dependent care flexible spending account (FSA), which can then be used to pay for eligible expenses such as day care, nannies or babysitters while you, or your spouse, are working. Because that money doesn't count as taxable income, depending on a family's tax bracket, the tax bill could be reduced by hundreds of dollars.
  • Tax credits. You might also be able to claim a child and dependent care credit on your federal income tax return. You can count a maximum of $3,000 in certain employment-related expenses, including qualified child and dependent care expenses for one qualifying individual and up to $6,000 for two or more. These amounts must be reduced by any amount deducted or excluded from your taxable income by your employer as a dependent care benefit, such as a dependent care FSA. The amount of the available credit depends on your adjusted gross income. Many families will qualify for a credit equal to 20% of any qualifying expenses, or a maximum of $1,200, while some families will be eligible for a credit of up to 35% of qualifying expenses; for more information on adjusted gross income limits and corresponding percentages and maximums, review Go to third-party website IRS Publication 503.
  • Reinvestments. Because saving for your kids' future education expenses can feel like a stretch when you're already paying for day care, perhaps calculate what you save on taxes by using the dependent care FSA or tax credit and then invest that amount into a 529 account.
Just remember that loans, scholarships and money your kids earn can help them pay for college, "but nobody other than you is going to fund your retirement," Polimeni says.
And as your children grow older, you may find that asking them to shoulder more of their own expenses provides opportunities to help them develop greater financial responsibility while giving you some welcome relief from spending pressures, says Valerie Galinskaya, head of the Merrill Center for Family Wealth™. These days, she says, parents seem increasingly willing to require their kids to pay for their own cars, hold summer jobs, pay a share of college costs or chip in for rent if they move back home. "This can reinforce good financial habits and self-sufficiency, and provide direct, experiential learning," says Galinskaya. "It's important for children of any age to prepare for living independently, especially when they stay 'in the nest' longer than expected."

3. What are your parents' needs?

There are several good reasons why your parents may need extra help. While longer life spans are good news for our loved ones, this longevity bonus means not only that their money has to last longer, but also that they're more likely to become infirm.
  • For a couple, both age 65, there's a 50% chance that at least one spouse will reach the age of 92.Footnote 2
  • Only about one-third of people currently age 65 will avoid the need for long-term care support at some point in their lives, according to the U.S. Administration for Community Living.Footnote 3
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Regardless of how much help you think your parents need, don't just swoop in and take charge, as that might offend them and be counterproductive. Instead, sit down with your family and talk openly about the issues.
  • What specific types of assistance do your parents require?
  • Who will provide the help?
  • Who will pay?
  • Who will be in charge?
Before offering your parents financial assistance, try to get a clear picture of what they can afford on their own. Make sure you assess all sources of income, including:
  • Social Security
  • Pensions
  • Investment income including annuities
  • Employment
Talking to parents about their finances and health

Use these tips for helping your aging parents while being sensitive to their perspectives and feelings.

You should also take into account any other assets they may have to fund retirement costs. Whatever your parents' assets, help make sure they have a plan for the disciplined spending of retirement savings and other investments.
Getting a clear picture of their resources could be challenging, as older family members may consider talking about finances, even with loved ones, to be impolite or otherwise out of bounds.
For example, it's worth discussing how to make use of any home equity your parents might have, suggests Vale. And if your parents truly have no assets or very few, Medicaid is there as a safety net to pay for long-term care for those who can't afford it, Vale says.

How can siblings help?

If there is more than one of you, it may be easier for the sibling who lives closest to the parents to inherit the bulk of the responsibilities, whether it's getting them to doctors' appointments, running errands or doing chores around their house.
To address such situations, which may impose an unfair burden, "perhaps those who live far away can chip in to help hire someone to help out," says Cynthia Hutchins, director of Financial Gerontology at Bank of America. Whether that's possible or not, Hutchins suggests holding a family meeting early on to discuss and settle such issues openly. Even small contributions can help, such as paying for an hour a week of help with cleaning or grocery shopping.
Perhaps the sibling who lives far away could host your parents for an extended stay so you get a break. Or maybe he or she could come to stay while you go on a vacation.
As longevity increases, the idea of sandwich generations is developing into the new normal, with one generation after the next putting its own spin on the solutions, Hutchins says. The one constant is the need for the generation currently in the middle to look after its own needs. You want to be able to help your parents out with confidence and grace, and help your kids achieve their potential. But you also don't want to be a burden to your children down the road, so saving for your own retirement and looking after your own financial and physical well-being is a favor you can do for them as well as for yourself.
Next steps

Footnote 1 US Census Bureau (2021). Number, Timing, and Duration of Marriages and Divorces: 2016.

Footnote 2 Tackling Retirement Risks, Spring 2022, Merrill. Chief Investment Office calculations based on Society of Actuaries, 2012 Individual Annuity Mortality Tables, Basic (latest data available).

Footnote 3 The Administration for Community Living, U.S. Department of Health and Human Services., 2020, accessed 1/23/2023.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
Before you invest in a Section 529 plan, request the plan's official statement and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the 529 plan, which you should consider carefully before investing. You should also consider whether your home state or your beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds and protection from creditors that are only available for investments in such state's 529 plan. Section 529 plans are not guaranteed by any state or federal agency.