Sandwich generation: How to manage caring for parents and kids
Editorial staff, J.P. Morgan Wealth Management
- Planning ahead for these types of expenses is one of the best ways to handle the financial burden of being a part of the sandwich generation.
- A flexible spending account (FSA) is a tax-advantaged savings account designed to be used for out-of-pocket health expenses. The money can be spent on eligible health-related expenses for either your kids or your parents.
- Tax credits, like the child and dependent care credit, can help lighten the financial load for many caregivers.
- Continuing to invest can be a helpful way to improve the financial outlook for you and for your dependents – particularly, a 529 account can help pay for education expenses, while retirement accounts can help you prepare for later in life.
- A financial advisor, tax professional and lawyer can also help with retirement and estate planning.
Did you know? There’s a group of middle-aged adults who are increasingly finding themselves caring for both an aging parent and their own young or adult children, otherwise known as the “sandwich generation.”
The financial burden that this puts on a person can be overwhelming. People in this situation might need more mental and financial support, as well as guidance on how to budget for the added dependents without compromising their own retirement or investments.
Here’s what you can do.
Plan ahead if you’re in the sandwich generation
Although this isn’t an option for everyone, if you’re able to plan ahead to prepare for the financial burden of caring for your children and parents at the same time, do it. There are several things you could do:
- Talk to your parents ahead of time. Discuss your parents’ wishes for long-term care. It can be a difficult conversation, but it’s one worth having sooner rather than later. The earlier you talk about this, the less likely you’ll be forced to find out this information at a more stressful time. Work with a financial advisor and a lawyer to detail an estate plan and put in place a power of attorney for your aging parents.
- Talk to your own children. Including your own adult children in financial discussions is a great way to be proactive and teach them the importance of discussing finances as a family, as well as your wishes and plans for the future. That way, your children won’t be forced to figure everything out for you (as you might find yourself doing for your parents).
- Build up your savings account. Saving money to be used for emergency or unexpected situations is one way to plan ahead. Finding yourself in need of money to help your child or parent can be stressful if you don’t have it on hand. Saving now for the unavoidable circumstances of the future can help you down the line.
- Long-term care insurance. Consider asking your parents to purchase for themselves a long-term care insurance policy or add a long-term care insurance rider to their life insurance policy if you’re concerned about the rising cost of something like a nursing home. Medicare generally doesn’t cover expenses like this. Consider getting it for yourself so your assets, including those that you may want to pass to your children, aren’t eaten up by health care costs in retirement.
- Get life insurance. This applies to both you and your parents. For yourself, some life insurance has a cash value that could be leveraged to help pay for your children’s college or, at the very least, provide a tax-free death benefit to help your spouse out in the event of your untimely death. While life insurance policies may be costly for older adults, some have a chronic illness rider that can help with paying for long-term care expenses, if needed. Read more about how to buy life insurance.
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What to do when you can’t plan ahead
For many in the sandwich generation, planning ahead is no longer an option. Some people find themselves already in the midst of caring for their aging parents and children without a plan in place and without the funds to support everyone.
For example, the Pew Research Center reports that, for Americans in their forties who have at least one living parent aged 65 or older, 54% also have a young child or an adult child they are financially supporting.
Even if you couldn’t plan for caring for parents and children at the same time, there are things to consider.
Spending accounts and other saving options
There are several options that allow you to use pretax dollars for qualified expenses.
Health savings account (HSA)
A health savings account is a savings account offered by employers for employees who have a qualifying deductible health plan. If you have a high deductible, you may pay for a lot of medical expenses out of pocket. An HSA can help with that. Here’s how they work:
- If you have an HSA, you contribute a set amount of money from each paycheck. The money is pretax. In 2025, you can contribute $4,300 for an individual per year and $8,550 for a family per year. The annual HSA contribution limits in 2026 are $4,400 for an individual and $8,750 for family coverage.
- You can use the money in the account to pay for qualified medical expenses, which includes things like deductibles and copays, dental and vision care, prescription drugs and more.
- The money in an HSA rolls over to the next year, and you can bring the HSA with you after leaving your job. However, if you can afford to pay current medical expenses out-of-pocket, your HSA contributions can continue to grow for future qualifying health care expenses in retirement.
Health reimbursement arrangement (HRA)
A health reimbursement arrangement is an employer-funded plan that reimburses employees for certain qualified medical expenses. Here’s how they work:
- An employer funds the plan with a certain amount. Employees who participate in the plan then submit their medical expenses for reimbursement.
- You cannot withdraw money to use for an upcoming medical expense. You must pay for it yourself, and then request reimbursement. There is also a limited amount of money in an HRA. If you use it all up, you can’t get reimbursed until the next year when the account is funded again.
- It can’t be used for medical expenses that aren’t deemed necessary for maintaining health, such as teeth whitening.
There are different types of HRAs. An HRA can be a good option if the family member you're caring for is a dependent when you file your tax return. Find out if your employer offers one and speak to a tax professional if there is a plan that works for your situation.
Dependent care spending account (DCSA)
A dependent care spending account allows you to set aside pretax money from your paycheck to be used toward child daycare expenses or elder care expenses. In some situations, the person you’re taking care of may need assistance throughout the day that you’re not able to be there for. A DCSA could help you pay for that care.
- In a DCSA, your contribution limit is determined by your tax filing status. If you’re married, filing separately, you can contribute $2,500 in 2025; if you’re single or head of household you can contribute $5,000, if you’re married filing jointly, you can contribute $5,000. If you make over $155,000, you can contribute $2,039 for 2025. These limits increase in 2026 to $7,500 for single filers, heads of household and married couples filing jointly, with people married filing separately able to contribute $3,750. If your annual compensation in 2026 is more than $160,000, your contribution to a DCSA is capped at $2,100.
- If you care for someone for more than eight hours a day who is incapable of caring for themselves, then any expenses used for daycare for that individual counts as a qualified expense in a DCSA account.
- You have to submit claims of your expenses when using a DCSA account.
Flexible spending accounts
A flexible spending account (FSA) is a possible option. Here’s how an FSA generally works:
- An FSA is a type of savings account in which you can deposit up to $3,300 per year to use on health-related costs. It’s designed to be used for out-of-pocket health expenses.
- The money can be used on eligible health-related expenses for either your dependent kids or dependent parents.
- It’s different than just taking the money from your paycheck and spending it directly on health costs because the money in an FSA is pretax. It goes directly from your paycheck (pretax) into the FSA. You get more out of money spent on health expenses when using it through an FSA.
If you know you’ll be spending on health expenses, choosing to use an FSA can save you some money. Check if your employer offers one.
Take advantage of tax credits
On top of the money that you can save with an FSA, there are tax credits that you can likely take advantage of as well. If you make less than $438,000 per year and pay someone to watch your child while you’re at work or have a spouse that is unable to care for themselves, you can claim the child and dependent care credit when you file your taxes.
The rules vary per household due to income and other factors. It’s a good idea to talk to a tax professional to help you get the most out of this credit. The child and dependent care credit should not be overlooked because taking advantage of it can help you get hundreds, if not thousands, of dollars back in your pocket.
Investing
Investing may seem like a faraway fantasy to those who are cash-strapped and caring for both their children and parents, but there are ways to invest that can help you keep caring for your family and yourself.
For example, that extra money you get from your tax credits could be used for your long-term goals. Here are some of the places you could put the money:
- 529 account. A 529 account is a type of investment account geared toward education expenses, offering tax-deferred earnings growth and tax-free withdrawals when the funds are used to pay for a designated beneficiary’s Qualified Education Expenses. Many state plans also offer special state tax incentives for in-state residents. For federal income tax purposes, Qualified Education Expenses include:
- Higher education, registered apprenticeships and vocational programs tuition and fees.
- Room, board and certain other expenses.
- Up to $10,000 per year (increasing to $20,000 for 2026) for tuition and certain other expenses between Kindergarten and 12th grade.,
- Fees, textbooks, supplies and education loan payments up to a $10,000 lifetime limit.
- Retirement. Don’t forget to fund your own retirement when caring for your dependents. If you find yourself struggling to continue to save for retirement because of the care you’re giving to others, you might end up having less money than you need when it comes time to retire. Like they say on airplanes, you have to help yourself before you help those around you. 54% of adults aged 40 to 49 and 36% of adults aged 50 to 59 are in the sandwich generation – and they are closer to retirement themselves. Consider continuing to fund your own retirement so you can have financial resources when you’re ready to retire.
Talk to a financial advisor and other professionals
Talking to a financial advisor is a good idea if you find yourself overwhelmed with how to support yourself and others in your life at the same time. A financial advisor can help you identify your long- and short-term goals and obligations and help structure a portfolio designed to help you achieve them, whether it’s to generate income or growth. They could also help your parents marshal their assets so your family is working together.
Equally important is speaking to tax and legal professionals who can help determine how best to handle these dual obligations, including setting up a power of attorney so you’re ready to step in when your parents can no longer handle their affairs, and setting up trusts and doing estate planning so that assets can be held and passed in tax-efficient ways. These professionals can work with your financial advisor to ensure that your approach is coordinated.
The bottom line
Being a part of the sandwich generation can be a financial burden for those who are caring for their aging parents and children. Thankfully, there are ways to make things easier to handle. Planning ahead and getting professional advice can make a big difference, whatever stage you may be in.
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Editorial staff, J.P. Morgan Wealth Management
