In today’s economic landscape, a unique group finds itself squeezed between dual financial responsibilities: the sandwich generation. This generation refers to individuals typically in their 30s, 40s, and 50s, who are caught between supporting their ageing parents and raising their own children. In fact, according to a recent study by Statistics Canada, 6% of Canadians reported sandwich caregiving, or providing unpaid care to both children and care-dependent adults. This dual responsibility can often lead to financial strain, pushing many towards the brink of debt. However, with strategic planning and mindful financial practices, it’s possible for the sandwich generation in Canada to navigate these challenges effectively. Here are several strategies for how the sandwich generation in Canada can avoid debt.
What are the financial struggles faced by the sandwich generation?
The sandwich generation faces two sides of responsibility, each with its own range of financial demands. On the one hand, this generation must have the finances available to support their children – their education, lodgings, and food. On the other spectrum, they need to look after their parents’ financial, medical, and emotional requirements also. This can put a financial burden on these individuals, which can quickly escalate if an elderly parent requires additional care or support. The associated costs are often more than can be covered by the elderly’s pension, which can in turn create pressure for those caring. Let’s say, for instance, you have a single mom caring for her father in a nursing home while at the same time funding both of her children’s university education. Although her father may have a pension, this will go directly to the nursing home, and will unlikely cover the monthly fees. Over time, this shortfall can quickly accumulate alongside a growing interest on top of the balance, placing real pressure on those looking after both their children and parents. This situation can leave those in the sandwich generation in fear of their finances, and can even lead to mental health problems associated with debt. If you too are in the sandwich generation, you may be dealing with the following:
- Handling your own household expenses
- Tackling a high amount of debt
- Living paycheque to paycheque
- Lack of savings
- Having emergency expenses
How to navigate being in the sandwich generation
There are a few ways we recommend navigating your journey through the sandwich generation if you too find yourself in this position:
Establish clear financial boundaries
One of the first steps in avoiding debt is to establish clear financial boundaries. This involves having open conversations with both your parents and children about your financial capabilities and limitations. Setting boundaries helps manage expectations and prevents overcommitment, which can lead to debt.
Create a budget
Creating a comprehensive budget that includes all income, expenses, savings, and debt repayments is crucial. It should account for the financial needs of yourself, and both your parents and children, including healthcare costs, education fees, and everyday living expenses. Monitoring your budget regularly can help identify areas where you can cut back or need to adjust your spending.
Working on a plan
It might be that you need to make some financial decisions in order to fund the situation you’re going through. Options might include:
- Selling some investments to fund the expenses
- Using cash or investments to generate income
- Downsizing your home for funds you can use for income or debt repayments
- Consolidating debt to make it easier to pay down
- Taking out a low interest loan or using a line of credit to pay for a big expense where savings are insufficient
It’s a good idea to seek financial advice before taking any drastic measures related to your circumstances.
Prioritize high-interest debt
If you’re already dealing with debt, prioritize repaying high-interest debts first. These debts cost the most over time, so paying them down quicker can save money on interest and help to prevent the debt from growing further.
Explore government benefits
Canada offers various tax credits and government benefits that can provide financial relief if you’re applicable. These include the Canada Child Benefit (CCB), caregiver credits, and Old Age Security (OAS) for your parents. For the sandwich generation in Ontario, the government offers a variety of post-secondary school funding options, including interest-free loans and grants, including the OSAP (Ontario Student Assistance Program). Educating yourself on these programs and taking advantage of eligible benefits can really help to ease the financial burden.
Begin an emergency fund
An emergency fund is essential for unexpected expenses, alongside saving for retirement to ensure your future financial security. Even small contributions can grow over time, providing a financial cushion that can prevent debt accumulation during emergencies or retirement.
Speak to a Licensed Insolvency Trustee
Navigating the financial challenges of the sandwich generation can be complex. Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. As experienced financial professionals at Spergel, with over 34 years of supporting Canadians through financial challenges, we are well placed to review your unique financial circumstances, provide personalized strategies for managing your financial situation, minimize debt, and help you to plan for the future. We can help you to reduce your debts by up to 80% via a consumer proposal, or eliminate your debt completely via bankruptcy, just as we’ve helped over 100,000 Canadians to begin a fresh financial future.
How the sandwich generation in Canada can avoid debt
Canada’s sandwich generation, caught between supporting their ageing parents and raising their own children, can avoid debt through a combination of strategic financial planning and mindful spending. Key strategies include setting clear financial boundaries with family members to manage expectations, creating a comprehensive budget that accounts for both elder care and child-rearing expenses, prioritizing emergency savings to cushion against unforeseen costs, and exploring all available government benefits and tax incentives for dependents and caregiving. Additionally, investing in personal financial education to make informed decisions and seeking professional financial advice from a Licensed Insolvency Trustee provides a pathway to managing financial pressures effectively. By balancing these responsibilities with a proactive approach to financial management, you too can navigate your unique challenges while minimizing the risk of accruing debt.
The financial pressures facing the sandwich generation in Canada are significant, but not insurmountable. By establishing clear financial boundaries, creating a budget, prioritizing debts, utilizing available tax credits and benefits, and seeking professional advice, it’s possible to navigate these challenges successfully. Spergel is committed to providing the support and expertise needed to help individuals and families manage their finances effectively, avoid debt, and secure a stable financial future. Book a free consultation today with one of our experienced Licensed Insolvency Trustees – we’re here to help you to get out of debt.
