The sandwich generation in Singapore: Finances of caring for aged parents and children

Giving your parents allowance is probably something you've been told to do since you were young. It's love, Asian style.

But as you start to have kids and your parents enter into retirement age, maintaining two or more households can start to be a real financial burden. This is compounded by the fact that costs of living in Singapore are on the rise every year.

Breaking out in cold sweat thinking about it? You can survive with proper planning. Let's work through this together.

What is the sandwich generation?

People who fall under the sandwich generation are typically within the age range of 35 to 59. They are usually working adults who have a few children and aging elderly (their parents) who rely on them for financial assistance and care.

It's a pressurising situation to be in, and it's made even more sobering in rapidly ageing Singapore, where the average lifespan is well beyond 80 years old. With parents, in-laws, and children to care for, the sandwich generation will likely carry this burden for a long period of time.

Expenses for children and elderly per month

Let's assume that you have two young children who are still in primary school, taking tuition classes within the average price range. Your parents are semi-retired but generally healthy. They have some ailments that require monthly visits to the clinic but medical costs are manageable. Your monthly outlay could look like this:

Aside from your own food, transport, phone bills, housing loan, shopping and so on, if you are in the sandwich generation, you're looking at an outlay of close to $3,000 for your dependents at least.

Do note that if you are still raising pre-schoolers, childcare fees  are significantly higher at around $500 to $800 a month. And when it comes to medical bills, sometimes all it takes is one major illness to wipe out family savings.

So if you foresee yourself joining the sandwich generation, it is important to plan early. Failing to plan for your 2-fold responsibilities as a member of the sandwich generation can be disastrous. Here are some ways you can prepare.

1. Share the responsibility among siblings

If you're like most Singaporeans, you're likely not the only child. Thank goodness for that!

Since you and your spouse are solely responsible for your children, it helps if you can share the burden of your parents' elderly care.

Have an open communication about the finances and logistics of care-giving with your siblings in advance. While it's something no one likes to do, you can avoid hot-headed conflicts when the time finally comes.

2. Know and monitor your parents' health conditions

Even if your parents seem to be strong as oxen, everyone grows old and is bound to develop ailments some day. If your parents are like typical Asian parents, they probably hate going for regular check-ups. But they should.

Early detection of illnesses can help to alleviate medical costs with preventive healthcare.

You (and your siblings) should monitor their health and keep tabs on things so you will have a rough idea of how much you need to set aside for their medical needs in the future.

3. Help your aged parents do financial planning

Having the money talk with the folks is kind of like them subjecting you to the birds and the bees talk. It's uncomfortable and awkward, but totally necessary.

If they've already got an adequate retirement plan in place, well and dandy.

But if they don't, ask if you can help them plan their retirement by mapping out their investments and assets to see if they'll be able to live out the lifestyle they want when they retire.

Make sure they have adequate insurance as well. Aside from the basic MediShield Life, they may want to look into getting Integrated Shield Plans and supplement their ElderShield Plan.

Another thing you can do is to top up their CPF such that their Retirement Account is at Full Retirement Sum.

The Retirement Account (RA) is the sum of their Ordinary Account (OA) and Special Account (SA) put into a single pot when they turned 55. When they're 65, they get a monthly payout from their RA. If the RA runs out, CPF LIFE kicks in. The annuity scheme gives out monthly sums till death.

But it's not a freebie. How much you get from CPF LIFE depends on how much is in your RA. That's why you need to get their RA topped up to the Full Retirement Sum or, better still, to the Enhanced Retirement Sum. Then, they can get as much as over $2,000 a month, which eases your financial burden.

4. Read up on government subsidies, payouts and tax reliefs

There are many government subsidies applicable for children and elderly.

If your parents are in the Pioneer Generation (born on or before 31 December 1949), they can benefit from subsidised healthcare included in the Pioneer Generation Package.

This includes subsidised GP and polyclinic visits. If they join CareShield Life-a national long-term care insurance scheme — by Dec 31, 2024, Pioneers will get participation incentives of $1,875 ($187.50 per year) and additional participation incentives of $1,125 ($112.50).

Pioneers will also receive MediSave top-ups, which range between $250 and $900 for life and pay less premiums for MediShield Life. They may also be eligible for an allowance of $100 a month for life if they are disabled and have trouble with Activities of Daily Living such as eating, bathing, dressing, toilet trips, and walking.

Aside to that, lower income Singaporeans above 65 years old will automatically be under the CPF Silver Support Scheme, which provides a quarterly cash supplement of between $180 and $900. They must have contributed less than $140,000 to their CPF and have a monthly income of less than $1,800 per household, and do not live in or own a 5-room or larger flat.

If you just had a baby, make sure you max out your baby bonus payout. Another wise thing to do would be to use your CDA account to save and pay for baby-related expenses as the interest rates for CDA accounts are higher at two per cent p.a.

5. Estate planning

It's not filial to talk to the folks about their eventual demise. To some more pantang (superstitious) senior citizens, it's almost like wishing them dead. But estate planning is important so as to make sure that your parents divide their assets according to how they want to. This prevents disharmony and infighting within the family later on.

They should write a will to nominate assets and cash, as well as make a CPF nomination to make sure their CPF is divided amongst their loved ones.

A Lasting Power of Attorney (LPA) might be helpful for ailing seniors because this allows someone else to take action on their behalf if they lose the ability to make their own decisions. It's a similar logic for an Advance Medical Directive, which tells the people around them that they don't wish their life to be prolonged using extraordinary life-sustaining treatment should they fall into a coma or become terminally ill.

6. Grow your money for your children's future education

Sure, you never know when or if your elderly will need intensive medical care. But your kids will more likely need money for university. Since you have more control over this aspect, plan ahead by investing in an education endowment plan.

There are two types. One is like life insurance. It pays out a lump sum after a specified period or, touch wood, upon death.

Another is a type of savings policy that spreads the payout over the university years of your child. One isn't necessarily better than the other, but it's worth spending time to think about which would be better for your child(ren).

7. Budget, save and invest yourself

Say you are in your early 30s. You can budget for the sandwich years by setting aside a sum every month in a low-risk bond or endowment plan so as to prepare yourself for the inevitable in 10 to 20 years' time.

Factor in long-term care which you can't personally provide, such as nursing home facilities, a maid or a live-in nurse.

And in case you're thinking of shirking your responsibility towards your aged parents? The Maintenance of Parents Act states that Singaporeans who are 60 years and above who cannot maintain themselves adequately is entitled to claim maintenance from their children.

Failing which, it may lead to court action with the parent's consent. Let's sure hope it doesn't come to that.

This article was first published in MoneySmart.