What's Happening?

The sandwich generation



If you find yourself in a situation where you are supporting your ageing parents and your own children financially, you form part of the sandwich generation, a term used to describe individuals facing the challenge of providing for two financially dependent generations. 

This is the experience of many South Africans, resulting in insufficient savings for their own retirement. “There is hope to narrow this savings retirement gap. By adopting smart investment behaviours, we can break the cycle of intergenerational financial dependence and secure a better future for ourselves and our children,” says Lungile Mashigo, Senior Marketing Manager at Discovery Invest.

Why financial dependence is so detrimental 

According to conservative estimates, at least 30% of South African households are now multi-generational. Moreover, an increasing number of adult children are returning home, adding further strain to already financially burdened households.

“The long-term implications of this intergenerational financial dependence on both current and future generations is detrimental to one’s retirement savings, leaving little room for personal financial growth and long-term security,” says Mashigo.

Squeeze your way out of the sandwich

Discovery Invest suggests the following helpful investment behaviours to help the Sandwich Generation navigate towards long-term financial security:

1. Invest early and more: The majority of South Africans have not invested enough towards their retirement. Increase your retirement savings as soon as possible, whether you are employed or self-employed. Consider speaking to your employer about increasing your contributions while ensuring that your take-home pay remains stable. And of course, remember to take advantage of the great tax benefits associated with retirement contributions.

2. Invest for longer: Consider planning to retire later or continuing to earn some form of income even after typical retirement age. This could be from consulting, renting or a different passive income stream. Extra contributions can make a big difference to your retirement savings as you’ll be earning interest on a larger sum of money at that time. Late in your career is also when your salary is likely to be at its peak, meaning you could afford higher contributions or investing for longer.

3. Withdraw wisely: When changing jobs, avoid cashing out your retirement savings. Preserve your benefits in your current retirement fund or transfer them tax-free to a new employer’s fund or a preservation fund. Cashing out can significantly impede your progress towards achieving your retirement goals.

4. Live well and budget: Detailed budgeting is crucial to identifying areas where you can reduce expenses. By analysing your spending habits, you can make informed decisions about where to cut costs. Consider opting for in-house or generic brands and prioritise essential items. This practice can help you save significant amounts each month. Plus, Discovery Invest rewards healthy investment and lifestyle behaviours with boosted investment returns! Learn more about how we can help you retire well. 

5. Boost your income with a side hustle: Convert your hobbies or skills into a viable business or side hustle. In South Africa, there is a shortage of artisans and skilled labourers. Develop your skills and interests into a profitable venture that can generate additional income. This extra income can contribute to your everyday bills and retirement savings.

6. Enhance your employability: Take advantage of opportunities to acquire new skills and further your education. Many companies offer employees the chance to study and improve their marketability. By equipping yourself with valuable skills, you increase your employability and create more opportunities for income generation.

“If you are part of the sandwich generation, you must be proactive in planning how you will break out of the cycle of intergenerational financial dependence,” says Mashigo. It will be necessary to save with more discipline and commitment but may also require working smarter. “Additionally, by investing early, making wise financial decisions, living within our means, and exploring additional income sources, we can secure a better financial future for ourselves and our children.”