As the financial squeeze hits all generations, more retirees are relying on their kids for support.

Are you in your 40s or 50s, or even 30s, and caught in a financial fix of supporting both your ageing parents and younger children, or even grandchildren? Then you’re a member of what is being termed the “sandwich generation” - you have to worry about your own upcoming retirement while helping out family members who may also depend on your salary and savings.

It has been estimated that as many as 20% of South Africans fall into this category (compared to 10% in the UK and only 6% in Japan). The high number can, in part, be accounted for by culture, longer life expectancies due to improved healthcare and medical advances, and a lack of knowledge or access to financial planning in the previous generation. If you find yourself caught in this situation, how on earth can you still find money to save for your own retirement so you don’t end up relying on your own kids in the future? Here are some smart financial moves to consider.

Don’t dip into your retirement savings, no matter how tempting
While treating your parents to a 70th birthday cruise, or using some of your retirement savings to convert your garage into a granny flat, may make short-term sense, in the long term you are damaging your prospects of financial independence in your golden years by drawing down your long-term savings. It’s important to remember that you need to stay invested over many years to keep building up your capital and take full advantage of compounding interest and dividends.

Draw up a financial plan and stick to it
Map out your future with your financial adviser and then see how you can free up some funds to put towards investments for your parents’ future. This will help you prioritise your financial commitments. Then consider including your parents in the discussion if possible. What are their savings suggestions? Be frank about your budget limitation. Maybe your dad doesn’t need to have that satellite TV channel to watch sport all day, or perhaps your mom could help with childcare to cut down on babysitting expenses? There’s always wiggle room when you’re committed to making your numbers work. And once you have a plan, stick to it. Keep investing your savings regularly, even when markets are falling and you’re tempted to hold back. Stay committed and let your investments work for you.

Start saving for your kids’ education (if you haven’t already)
Don’t rely on #feesmustfall – your children are going to be costly to educate on a tertiary level, no matter what. This should be a consideration in your overall financial planning. The time your kids are being shipped off to varsity will likely coincide with the time your parents retire and may need to lean on you financially. Tax-free unit trusts, where all the income and dividends earned are 100% free from tax, are excellent and flexible investment options to take advantage of when saving for a child’s education. Prudential offers a range of tax-free unit trusts suitable for a variety of investor risk profiles and return targets.

For more information about our funds, contact your Financial Adviser or our Client Services team on 0860 105 775 or at info@prudential.co.za