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Grandparents Want to Financially Support and Empower Their Grandchildren – But are Looking for Help
A substantial number of grandparents are committed to providing financial gifts to their grandchildren and their families, and enjoy doing so. But for many grandparents, their ability to help is constrained by concerns about their financial future and limited use of long-term investment vehicles.
Those were among the key findings of a first-of-its-kind survey recently conducted by AARP Financial Inc. to better understand grandparents' attitudes and behaviors in support of their grandchildren. AARP Financial Inc. surveyed 600 grandparents age 50 and up, all of them with responsibility for financial decision making in their households.
The good news? No matter what the circumstances, there are many things that grandparents can do today to make a more meaningful contribution to their grandchildren for the future, while imparting a critical life lesson about the importance of saving and investing.
How Grandparents Give: The Big Picture
For the most part, today's grandparents prize their relationship with their grandchildren — and greatly enjoy giving them gifts. Grandparents spend about $600 per year in total on their grandchildren. The typical grandparent has about four grandchildren — which means the average spent is about $150 per grandchild. With a median income of approximately $46,000, the grandparents surveyed typically spent 1.3% of their annual income on their grandkids.
A significant number of grandparents provide vital financial support to their grandkids. Among the grandparents surveyed:
- 21% have given a "significant" amount to help pay for college
- 22% have provided money for grandchildren's basic needs
- 20% have provided daycare on a regular basis so their parents could work
Two out of three grandparents say they prefer grandparenting to parenting, and 83% say they give financial support because it makes them happy.
Married grandparents tend to agree on how to support their grandchildren: 97% of the married grandparents surveyed said that they have never had a major disagreement with their spouse over financial contributions to their grandchildren.
What Influences Giving?
For grandparents who provide little or no substantial contributions to their grandchildren (about 30% or 182 of the 600 surveyed), a primary concern is the need to stay financially secure throughout their retirement years. Among these grandparents, factors that constrain their giving include concerns about running out of money as they age (42%) and the need to save or pay for medical expenses (45%) as well as a lack of resources (55%).
Nearly six of 10 (58%) of these grandparents said their grandchildren did not need their financial support.
Grandparents' giving is also influenced by concerns about spoiling their grandkids. Just under four out of five grandparents surveyed (79%) agree that kids today do not understand the value of a dollar and 57% say they are afraid that if they give their grandchildren too much they will spoil them. Among grandparents providing support to their grandkids, 61% said they have or would likely consider stopping or limiting their support if they believed their grandchildren were not using the money responsibly.
Giving with a Purpose and a Plan
The survey indicated a strong desire from grandparents to be sure their gifts have value and meaning. However, few grandparents give for long-term goals or take advantage of investment accounts to improve the potential for their money's growth.
Only 22% of grandparents have ever opened a saving or investment account on behalf of a grandchild — and grandparents who have done so were most likely to invest in a "low return" vehicle like a bank savings account. Few grandparents are aware of available investment options that are appropriate for use with grandchildren such as a Coverdell Savings Account (Education IRA) (21%) or a UGMA/UTMA (7%).
Take advantage of the power of compounding. By starting early and staying invested in special college savings and gift giving accounts, grandparents can help to better prepare for their grandkids' futures.
The Recognition Factor
Grandparents appreciate recognition for the gifts they give. In fact, over half (54%) of grandparents who provide financial contributions or gifts said they would be very or somewhat likely to stop or limit support if they felt their grandchildren did not appreciate it. Hands-down, an in-person thank you is deemed the most appropriate way for a grandchild to thank them for a gift, cited by 46% of grandparents who currently provide support to grandchildren school-age or older. A phone call was next at 28%. Only 2% thought an e-mail the most appropriate way to say thanks.
Summing Up . . .
The AARP Financial Inc. research demonstrates that grandparents are committed to helping their grandchildren and derive great joy in giving them gifts.
At the same time, many grandparents are not using — nor are they even aware of — the valuable saving and investing tools that can help them make the most of what they give.
As more and more Americans enter their grandparenting years — and as price tags on big ticket items like homes and a college education continue to rise — grandparents are likely to play an increasingly important role in the financial lives of their grandchildren.
If you're interested in learning more about how to help your grandchildren have a brighter financial future, take a few minutes to speak to a AARP Financial Advisor; call 1-866-218-6142, Monday to Friday, 8:00 a.m. - 6:00 p.m. Eastern Time.
