Common Financial Challenges: Belief vs. Reality

Common Financial Challenge: Sandwich Generation

Belief: My parents planned for their financial future.

Reality: Many people end up supporting both their children and aging parents simultaneously.

The term “sandwich generation” describes adults who are in the challenging position of caring for both their aging parents and their own children simultaneously. This scenario is becoming more common as people are having children later in life, while also dealing with elderly parents who require support.

Among adults who have a parent that is 65 years of age or older:

60% of adults with a parent aged 65 or older have helped them with tasks like errands, housework, or repairs in the past year.
30% have provided financial assistance to their parents.
Around 14% have assisted with personal care, such as bathing or dressing.

According to the Pew Research Center, more than half of adults in their 40s and 50s are shouldering this dual financial burden. With Americans living longer lives, adult children are finding that their responsibility to care for their elderly parents extends further into adulthood than before. On top of that, economic setbacks like the Great Recession have made it more common for young adults to rely on their parents for financial support well into their 20s or even 30s.

In light of these challenges, having a life insurance policy becomes increasingly important. A well-chosen life insurance policy can provide a financial safety net for both generations, ensuring that your parents can continue to receive the care they need while also securing your children’s financial future.

Taking additional steps like saving for long-term care needs and drafting a will can also be beneficial. These measures can help you plan for the future and could prevent your children from finding themselves in a similar “sandwiched” situation.

Common Financial Challenge: Divorce

Belief: I won’t get a divorce.

Reality: Many marriages end in divorce.

Statistics tell a compelling story:

Divorce rate for first marriages: 41%
Divorce rate for second marriages: 60%
Divorce rate for third marriages: 73%

The often-quoted statement, “Half of all marriages end in divorce,” may not be entirely accurate, but it captures a trend that began with the Baby Boomer generation. Many Baby Boomers married young and started families quickly. As their kids grew up and moved out, these couples reevaluated their relationships, often leading to higher divorce rates.

Their children, part of Generation X, grew up seeing divorce as a fairly common life event. But they’ve also altered the pattern by delaying marriage until later in life, contributing to a slight decrease in the divorce rate.

For Millennials (Generation Y), cohabitation before marriage has become more the norm than the exception. Many see marriage as an economic burden, influenced in part by observing their parents go through both divorce and economic downturns.

Though nobody enters marriage anticipating a divorce, being prepared is prudent. In the past, the idea of married couples having separate bank accounts was rare. Now, 32% of Americans maintain separate finances from their partners.

Prenuptial agreements are on the rise as well. Millennials are on a mission to avoid the messy divorces they witnessed their parents go through.

Prenups are not just for the rich and famous; they’re practical tools for protecting individual assets, especially as people are marrying later in life with more to protect.

Trusts are another financial planning tool that can safeguard assets. A trust established before marriage usually counts as separate property and can protect your assets in various life scenarios.

Having separate bank accounts, writing a prenuptial agreement, and owning trusts are a few ways you can plan ahead to make the event of a divorce easier, should it ever come to that (we hope it doesn’t.)

Protecting Yourself From Future Challenges

There is no way to 100% avoid any of these challenges, but the unifying thread among them is the importance of financial planning and the value of safeguarding against unforeseen circumstances.

The key takeaway is simple: Being proactive in your financial planning can act as a safety net, catching you when life throws its curveballs. This is not about living in constant fear of what could go wrong but about empowering yourself to live your life with greater confidence and security.

There are no guarantees in life, but that doesn’t mean you should leave everything to chance. Financial preparedness allows you to face life’s complexities head-on, offering a semblance of control in an unpredictable world.

If you feel overwhelmed by the complexities, consider consulting a financial advisor to help chart a course through these potential challenges. By taking steps today, you’re not just planning for the “what-ifs”—you’re investing in your peace of mind for the years to come.