Financial literacy more critical than ever for sandwich generation

The traditional family framework is long gone. Compared to previous generations, the nuclear family is shrinking, and household dynamics are becoming increasingly complex. Statistics Canada data shows that one-person households reached an all-time high in 2016 and multi-generational households are the fastest growing.

While evolving societal norms and values underpin these trends, money is also a large factor. For Canadian millennials who are particularly under strain due to soaring living, housing and education costs, Forbes got it right when it stated, “millennials have simply concluded that raising children is too expensive.”

FP Canada, the national professional body for Certified Financial Planners (and working in the public interest), explores these trends further in a 2019 study on financial dependency. Unceremoniously dubbed the “bank of mom and dad,” Canadian parents are throwing their kids a lifeline when it comes to money. One-third of parents have assisted their adult children with the cost of rent and 36 per cent intend to do so when their kids become adults. Additionally, four in 10 Canadian parents say they expect that helping their children buy a home will postpone their retirement. Meanwhile, half believe assisting their children with post-secondary costs will also delay their retirement.

At the other end of the spectrum, the senior years can be financially challenging, and as a result, many older Canadians turn to their own children for support. Among those with one living parent, 14 per cent said they expect to be supporting their parents financially, which will cause them to postpone their retirement, and 12 per cent expect it will prevent them from paying off debt. Younger Canadians between the ages of 18 and 34 are particularly worried, with one in five expecting to postpone their retirement as a result of financially supporting their parents.

If that isn’t scary enough, there is also a significant segment of Canadians who are caught in the middle, financially supporting both their children and parents. Thirty per cent of this “sandwich generation” expect they will need to provide financial assistance to both their adult children and parents at the same time. Additionally, one in four (25 per cent) say providing support to both their children and parents is likely to cause a strain on them financially.

Supporting two generations only adds to the stress of bigger picture issues that confront people on a daily basis. From paying bills, coping with surging debt, shaky job security and rising cost of living, adding double dependency into the mix can feel overwhelming.

Parents (young and old) need to be aware of the tools available when it comes to financial literacy. More than half of Canadians are unfamiliar with the tax credits and financial assistance programs available to help them support their adult children and aging parents. November is Financial Literacy Month in Canada and with Financial Planning Week taking place nationally from Nov. 17 to Nov. 23, it’s a time to consider what makes people tick. Rotman’s Dilip Soman, Canada research chair in behavioural science and economics, says that not all financial matters are rational. He states there’s a common behavioural disconnect in the financial planning process: even though you’re eager to reach your goals, it can be hard to motivate yourself to write a financial plan.

It’s not necessarily a gloomy forecast, just an enlightening one. There are a multitude of resources available to all members of the family. Nonprofit organizations like FP Canada can help people at any stage in their lives.

Kelley Keehn is a Personal Finance Educator and FP Canada Consumer Advocate. Kelley’s newest book, “Talk Money to Me,” published by Simon and Schuster, will be in bookstores from Dec. 17, 2019.