What is the sandwich effect?
Supporting adult children is causing boomers save less savings than they require. “The online survey of 523 millennials (aged 18 to 34) and 365 non-retired Boomers (aged 52 to 70) was completed online between Oct. 21 and Nov. 3, 2016. The margins of error for these samples is +/-4.3%, 19 times out of 20 for the millennials and +/- 5.1% 19 times out of 20 for boomers.”
The article continues by discussing this requires some preparation. TD provides recommendations to discuss how much and when the financial support should start and stop. They claim they should provide a road map or mini-goals to slowly wean the child off. They call this phenomenon of Deja-Boom.
Q: What do I think about this?
A: This is a stressful phenomenon on both sides of the equation. Parent’s need to keep working to provide for their adult children and ageing parents. University grades are overqualified, 40% of those aged 25-34 are overqualified for their job.*
“58% are stressed financially.
25% are providing financial assistance to either children or grandchildren.
62% claim they cannot save due to the support they are providing.”
Wait one minute, I have a few questions!
How does the survey actually the baby boomers surveyed actually had nough savings to begin with? How many of these participants had or have a retirement projection done? The press release has no mention of this. I believe this to be an important fact in order to establish a benchmark. If we look at the general population, they are stressed about money and work regardless of their age. I believe there there may be some scapegoating in this survey. I believe there is a sandwich effect on Baby boomers however I am not convinced it is causing the group to “un-save” or un-retire.
What do I think?
Lack of financial litercy is contributing. Due to my years of working with various clients, they lack general financial knowledge. We need to provide more financial education. Listen to my podcast about children and money!
This not a one-size-fits all. Financial education starts at home, continues at school, and then should be maintain with a financial professional. Seek out professional advice to equip yourself for this new era of your life.