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Financial Planning
Monday, August 24, 2015 - 02:16
Between a rock and a hard place

The South African Saving’s Institute (SASI) launched National Savings Month with a convention breakfast that had the theme, ‘Savings for the Sandwich Generation’, and that effects millions of South Africans.

The Sandwich Generation is a global term, which refers to the generation of middle-aged individuals who are pressured to support both aging parents and growing children. The sandwich generation is so-named because they are effectively "sandwiched" between the obligation to care for their aging parents - who may be ill, unable to perform various tasks or in need of financial support - and their children, who require financial, physical and emotional support. The trends of increasing lifespans and having children at an older age have contributed to this phenomenon.
Notes Gerald Mwandiambira, acting CEO of the South African Savings Institute (SASI), “South Africans who have risen to new generational wealth leave a wealth gap between themselves and the generation above as well as below.” Through cultural ideas such as ‘Ubuntu’ and ‘familie gees’, the new middle class is expected to portion off their salary for their family’s aid when required. This normally takes the shape of a retirement allowance for the older generation, or education fees for siblings and children. “As their salary is divided up, this generation is unable to save for themselves. But if this generation does not save, especially for their own retirement, the phenomena will be passed onto the next generation.”
Ayabonga Cawe, economist and Executive Chair of Rethink Africa stated the issues that come with class upward mobility: “higher incomes, greater educational prospects and attainment and relative socio-economic advantage, combined with a history of collective exclusion and the resultant impacts of that. After all, as a ‘new’ class, many in the emergent black middle class have strong familial and social ties to marginalised township and rural communities.”
The middle class has grown by 3.1 million individuals between 1993 and 2008. According to the Old Mutual Savings and Investment monitor research the sandwich generation currently makes up 25% of the working metropolitan South African population, up from last year where it was 23%, which makes this generation’s savings predicament a prominent issue for government and private banking institutions to solve.
John Manyike, head of Financial Education at Old Mutual, stated that the percentage of people wedged in the sandwich generation aged between 18 and 30 continues to grow year on year. He said, “With that increasing inability to save for important long term financial objectives like saving for your children’s education, the consequences can extend far beyond just household savings levels, but can also result in the dire situation of nurturing an even broader population of uneducated people in South Africa. “The key element to factor into ones daily lives when challenged by the sandwich generation phenomenon is to create a balance between taking care of our parents and our children,” says Mwandiambira.
Olano Makhubelo, Director of Finance from National Treasury, claimed that more and more individuals are being included into the formal economy. “What is concerning is that only 44% of these individuals have long-term savings or pension; an amount that we see decreasing annually.”
Comment Mwandiambira, “If we are unable to end the cycle of intergenerational wealth gaps and black tax, then the rising middle class will not be able to shake the shackles of the past, preventing wealth creation through savings. Government, financial institutions, retailers and stokvels need to look at the needs of this generation, and offer product solutions that will enable them save for both the short and long term.
“For instance, there are funeral policies that will cover up to 50 family members, lowering the cost for the Sandwich Generation. However, funeral policies address death when there is an urgent need to consider the needs of the living, both young and old, supported by a financially stressed middle generation.”
A key observation from this global phenomenon is the fact that finding oneself in this “sandwich generation” predicament usually boils down to a simple lack of planning.
He says this reliance and dependency eventuality is often not prepared for. “So when individuals find themselves not only having to look after themselves and their own offspring, but then also their aging parents (who have not financially planned adequately for their own survival) - this rock and a hard place has devastating effects.” As one is then likely to jeopardise one’s own retirement planning and the cycle of dependency continues – as your funds are used to aide those dependent on you and then you in turn become a financial burden to your own children as you will have to rely on them for financial support during your own retirement.
“The only solution to this dilemma,” says Mwandiambira, “is to plan, plan, plan and to acknowledge the risk of being financially sandwiched between two generations (or more – known as the Club sandwich generation).” Simply there is little choice but to reduce spending and increase saving. Be sure to understand your finances and be financially educated and always seeks expert financial advice. These 3 simple steps can do so much for you and your loved ones.
“At the South African Savings Institute, we encourage individuals in the Sandwich Generation to seek alternatives that will enable them to save for their own retirement, without early withdrawal, as well as for their children’s education, in an effort to break the cycle.”

Copyright © Insurance Times and Investments® Vol:28.8 1st August, 2015
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