The dependency cycle is worsening, putting further pressure on those who have an income.

I have to confess that the latest results from the Old Mutual Savings and Investment Monitor made for sombre reading. We all know that households are starting to reel from multiple price and economic shocks as we face a weaker economy, tax and interest-rate increases, as well as price hikes for basic essentials such as electricity and petrol; but what is especially concerning is that the indicators suggest that household finances are set to deteriorate further, especially for the so-called “sandwich generation”.

Approximately a quarter of the economically active people interviewed for the survey described themselves as part of the sandwich generation – so called because they support both adult children and aging parents. This is the highest level since the survey began in 2008.

While this is a global phenomenom, South Africans have the added burden of supporting extended family, with a third of respondents saying they have dependents other than their own children – this number has increased from 25% in 2010.

What is clear is that the sandwich generation is battling to make ends meet. Nearly a third of this group said that they are overdue with debt repayments, compared to 15% of “non-sandwichers”.

The research suggests that this trend is expected to continue upward, with 55% of those interviewed expecting to look after parents or other family members in the future.

This is a significant increase from 48% last year, and most of those who expected to care for their parents are aged between 18 and 30 years old. Moreover, 41% of parents interviewed believed that their children should take care of them in retirement!

Parents placing expectations on their adult children

So the expectation is clearly there – especially among the lower-income earners, where 56% of those interviewed believe their children will care for them. The burden continues to fall on the younger generations, who in turn are already struggling to find work. The current unemployment rate for those under the age of 25 who are actively looking for work is now in excess of 50%. That means only one out of every two young people is gainfully employed – yet they are expected to support older generations.

Considering the high levels of youth unemployment, the figure that over half of 18-30 year-olds interviewed still live at home would make sense. Except that these figures are not as they appear, since the Old Mutual survey interviews only working adults.

Lynette Nicholson, research manager for the Savings and Investment Monitor says that unlike other countries where parents are often supporting their adult children, many of these youngsters are living at home to support their parents. “We found that with working people aged 18-23, nearly a third have dependents other than children – nearly half of the younger generation still living at home are supporting their parents, not the other way round.”

Borrowing from friends and family

This can only mean that the rate of dependency on those who are employed is growing, with more people turning towards family and friends for financial support. “The research shows that people are looking towards family and friends for both advice and for help with money,” says Nicholson.

As the credit line from formal institutions dries up, so people look to family and friends for loans. The survey found that personal loans from financial institutions had declined from 20% to 16%, but that loans from family and friends had increased from 7% last year to 10%. In lower-income groups, this figure was even higher, with 18% of people borrowing from family and nearly half saying that they repay them “irregularly or only when they can”.

As the economy continues to slow with no real prospect of employment rates increasing, the dependency on those who have some money will continue and there is certainly no sign that the younger generation are making any attempt to break the cycle of dependency in terms of their own financial futures.

The Savings and Investment Monitor found that while on average 62% of those surveyed contributed towards a pension/provident fund, this figure dropped significantly for people under the age of 35, with only half of them making any provision while only a third of people under the age of 25 contributed to a retirement fund.

Young professionals need to understand the financial pressures they will be facing and start now to make sound financial decisions that do not involve taking on unnecessary debt and rather save money towards their future.

The Old Mutual Savings & Investment Monitor surveys the savings and investment habits and behaviours of working metro households in South Africa.