Cover_final.pdf 7/9/2010 1:36:36 PM Paper size: 210mm x 270mm Feeling the squeeze Asia’s Sandwich Generation LONDON 26 Red Lion Square London WC1R 4HQ C United Kingdom M Tel: (44.20) 7576 8000 Y Fax: (44.20) 7576 8500 CM E-mail: [email protected] MY CY NEW YORK CMY 750 Third Avenue K 5th Floor New York, NY 10017, US Tel: (1.212) 554 06000 Fax: (1.212) 586 0248 E-mail: [email protected] HONG KONG 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: [email protected] GENEVA Boulevard des Tranchées 16 1206 Geneva A report from the Economist Intelligence Unit Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 Sponsored by E-mail: [email protected] Feeling the squeeze Asia’s Sandwich Generation Contents Preface 3 Executive summary 4 Introduction: sandwiched between young and old 6 How large is Asia’s sandwich generation? 8 1. Family responsibilities 10 Filial values 10 Children come first 11 2. Financial pressure 13 Education is a priority 13 Parents cost money too 15 Japan: an ageing outlier 17 Costs are expected to go up 18 3. Working harder, saving less 20 Taking fewer risks 21 Reeling from the financial crisis 22 A dearth of financial advice 24 4. A happy retirement? 25 The pessimists 25 The optimists 26 From doting to dotage 27 Conclusion: a generation under pressure 28 Appendix: survey results 29 © Economist Intelligence Unit 2010 1 Feeling the squeeze Asia’s Sandwich Generation Disclaimer © 2010 The Economist Intelligence Unit. All rights reserved. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the Economist Intelligence Unit and the sponsor do not accept responsibility for any loss arising from reliance on it. Fidelity, Fidelity International, and Fidelity International and Pyramid Logo are trademarks of FIL Limited and are used with its permission. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Economist Intelligence Unit. 2 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation Preface Feeling the squeeze: Asia’s Sandwich Generation is an Economist Intelligence Unit report, sponsored by Fidelity International. The findings and views expressed in this report do not necessarily reflect the views of the sponsor. The report’s quantitative findings come from a survey of 700 respondents in Asia, conducted in April and May 2010. The Economist Intelligence Unit’s editorial team designed the survey. Anna Morris was the author of the report and David Line was the editor. Gaddi Tam was responsible for design. To supplement the quantitative survey results, the Economist Intelligence Unit also conducted in- depth interviews with relevant experts and individuals supporting parents and children. We would like to thank all interviewees for their time and insights. August 2010 © Economist Intelligence Unit 2010 3 Feeling the squeeze Asia’s Sandwich Generation Executive summary The burdens on the Sandwich Generation—those people “sandwiched” between the competing demands of caring both for their children and for their parents—have gained attention in Western countries over the past 30 years. Rising longevity and declining fertility have combined to swell the number of elderly needing care and reduce the number of workers supporting them. Parents are also waiting longer to have children, and more of those children require support through higher education, raising the likelihood that middle-aged workers will end up having to support older and younger generations simultaneously. Asia, in which Confucian principles demanding respect for one’s parents have always been strong and great value is placed on educational attainment, can expect rapid growth in the ranks of its Sandwich Generation in the near term—and greater burdens upon them in the future. This report, sponsored by Fidelity International, examines Asia’s Sandwich Generation: their priorities, the challenges they face, the impact of providing for multiple generations on their financial situation and their plans for old age. It is based on surveys of members of this cohort in Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan, and in-depth interviews with experts on regional demographics, financial professionals and members of the Sandwich Generation themselves. The results show that members of Asia’s Sandwich Generation are typically between the ages of 30 and 45, married, and supporting one or two children and two parents or parents-in-law. Across the countries surveyed, this cohort is an estimated 20% of the working-age population (defined as between 21 and 70 for the purposes of this report). The key findings of the report are as follows: • The pressures of supporting parents and children on Asia’s Sandwich Generation have grown as children stay at home longer and life expectancy rises. Asia is in the midst of a fundamental demographic transformation as large numbers of people move into old age and the elderly begin to outnumber the young. But demographic change has already altered the Asian family in important ways. As life expectancy has increased and women have entered the labour market and delayed having children, families are simultaneously caring for young children and ageing parents more than in the past, and doing so while both spouses work. But although the challenges of providing for parents and children may have increased, in Asia the Sandwich Generation’s sense of filial obligation remains strong, with 78% agreeing that it is their responsibility to help their ageing parents. • Education is a top priority and key expense for the Sandwich Generation, and they are willing to pay handsomely for the investment in their children’s future. Although their commitment to their elderly parents is strong, Asian Sandwich Generation members uniformly spend more time and money caring for their children, and their children’s education is the primary concern. Even if they are not paying steep school fees at private schools, between the cost of tutors, sports and music lessons, and any number of extracurricular activities—which parents consider an integral part of their education—the expenses are 4 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation considerable. Moreover, many expect to continue paying for their children into early adulthood: 58% of Sandwich Generation members expect to care for their children into their 20s. • Caring for parents can also be expensive, especially where the social safety net is weak. In regions where the elderly often lack pensions or access to public healthcare services, the burden is heavier on Sandwich Generation members to cover their parents’ costs out of their own pockets than elsewhere. Sandwich Generation members in China and Hong Kong find themselves spending more on their parents than their Asian peers, the result of underdeveloped social security systems that provide little support for retirees or their families. However, parents frequently assist the Sandwich Generation in return, providing childcare or other support. • The Sandwich Generation is working harder, saving less and taking fewer risks with their investments in order to provide for the needs of their children, their parents and themselves. More than one-third of Asia’s Sandwich Generation members have had to work harder to cover family expenses since becoming “sandwiched”. At the same time, about half have reduced their savings and investments, and nearly two-thirds are more cautious with their existing investments than they would otherwise be. Unsurprisingly, they mostly prefer low-risk bank deposits as their primary savings vehicles. • Although most of Asia’s Sandwich Generation is actively saving to finance retirement, many foresee a lower standard of living once they stop working. For the most part, members of Asia’s Sandwich Generation are contributing to public and private pensions or insurance policies, but 42% overall expect their standard of living to decrease once they leave the workforce. South Korean and Japanese Sandwich Generation members have the highest level of anxiety about their retirement years. The mood is very different among those in China, many more of whom (51%, compared with an aggregate of 22%) expect that public benefits will increase in the future. Regardless of their projections for the future, few Asian Sandwich Generation members (16%) seek professional advice in financial planning. • Because there will be fewer of them, the next Sandwich Generation will shoulder more onerous burdens than the current one. As fertility rates have fallen, the Asian family has become smaller, which means that today’s Sandwich Generation members will have fewer children to care for them in their old age than their parents did. So while the absolute numbers of the Sandwich Generation may not increase over the long run, in the future people will have fewer siblings with whom to share the increasingly heavy burden of caring for ageing parents. © Economist Intelligence Unit 2010 5 Feeling the squeeze Asia’s Sandwich Generation Key points n An estimated 20% of the working-age population across Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan are members of the Sandwich Generation—those people supporting parents and children simultaneously. n The sandwich generation is biggest in China and smallest in Australia and Japan. n Demographic trends—increasing longevity, delayed childbearing and smaller family sizes—are increasing pressure on those caring for parents and children. Introduction: sandwiched between young and old n 1981, sociologist Dorothy Miller coined the expression “the Sandwich Generation” to identify a Isegment of the population of middle-aged adults caring for their children as well as their ageing parents.