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Grandparents Spend Time & Money Generously on G-Kids

Grandparents today share in the financial and cultural support of their grandchildren, like never before. A new survey estimates grandparents spend $179 billion dollars per year on their grandchildren. The average age of becoming a first-time grandparent is 50 and the average number of grandchildren is four to five.

The AARP’s Grandparents Today National Survey says since 2001 the number of grandparents has grown by 24% from 56 million to 70 million. The number of grandparents in the workforce has increased in the past seven years, with 40% of grandparents currently employed up from 24% in 2011. Also, grandparents spend an average of $2,562 annually on their grandchildren.

Grandparents Spending

Grandparenting Challenges

However, the AARP discovered grandparenting can have a downside for some: 13% of grandparents struggle with the financial expectations of being a grandparent, including the cost of traveling to see the grandchildren. Seven percent of grandparents have taken on debt to help their grandchildren pay for college and one in four of those grandparents have cosigned private student loans for their grandchildren and/or incurred credit card debt that has not yet been paid back in full.

Other interesting findings of the AARP research include:

•   94% of grandparents provide some sort of financial support to their grandchild(ren);
•   87% would accept an LGBT grandchild;
•   34% have grandchildren of mixed or different race/ethnicity;
•   71% say their health status is very good or excellent;
•   89% say their relationships with their grandchild(ren) is good for their mental well-being;
•   29% live more than 50 miles away from their closest child, up from 19 percent in 2011;
•   11% have a grandchild living with them, consistent with 2011 results;
•   5% of those in multigenerational households are primary caregivers of a grandchild living with them.

Family Money Habits

Another survey by T. Rowe Price found parents who discuss financial topics with their kids at least once a week are significantly more likely to have kids who say they are smart about money (64% vs. 41%). Frequent topics parents have used to initiate money conversations have included:

• Back to school shopping on a budget (47%)
• Figuring out how much was saved by purchasing sale items (45%)
• Going into a physical bank (41%)
• Discussing the cost of college (41%)
• Discussing why they didn’t take a bigger vacation (34%)

Do Good Money Habits Pass Down?

Kids who manage their own money have better money habits: 44% of parents let kids decide how to save and spend their money on their own. Compared with parents who do not give their kids that control, those who do let them manage their money are less likely to have kids who:

◦ Spend their money as soon as they get it (40% vs. 53%)
◦ Have lied to their parents about what they spent their money on (29% vs. 49%)
◦ Expect their parents to buy them what they want (52% vs. 65%)
◦ Feel ashamed because they have less than other kids (30% vs. 50%)
• Kids who manage their own money discuss money more: They are more likely to say that:
◦ They talk to their parents about money (76% vs. 70%)
They have learned about money from their grandparents (55% vs. 44%), teachers (45% vs. 37%), or other family members (32% vs. 22%)

Many parents still have some reluctance to discuss financial matters: 69% of parents have some reluctance to discuss money matters. And 61% of parents only discuss money with their kids when their kids ask about it.

When parents model good money habits, kids notice: 39% of parents have at least three types of savings (i.e., retirement savings, emergency fund, college savings, or money saved for another goal). These parents are more likely to have kids who have money saved (98% vs. 86%) and have talked to their parents about money (83% vs. 66%). They are also less likely to: Spend their money as soon as they get it (40% vs. 52%) & Have lied to their parents about what they spent their money on (34% vs. 43%

Do Bad Money Habits Pass Down?

Parents’ bankruptcy affects kids: 19% of survey respondents have declared personal bankruptcy at some point in their lives. Compared with parents who have not declared bankruptcy, those who have are more likely to have kids who:

  • Do not save any money they receive (16% vs. 6%)
  • Usually spend money as soon as they get it (71% vs. 42%)
  • Expect their parents to buy them what they want (72% vs. 56%)

Money is a difficult topic for parents who have declared bankruptcy: 69% of their kids know that their parents have declared bankruptcy. But the parents are more than twice as likely to say that they are very or extremely reluctant to discuss finances with their kids compared with those who have not declared bankruptcy (44% vs. 20%).

Significant credit card debt affects kids too: 53% of all respondents have credit card debt, and within that group, 48% have $5,000 or more in credit card debt. While the effects are less pronounced compared with families who have experienced bankruptcy, similar trends are seen. Compared with parents who do not have at least $5,000 in credit card debt, those who do are more likely to have kids who:

  • Usually spend money as soon as they get it (58% vs. 44%)
  • Expect their parents to buy them what they want (65% vs. 57%)

Parents with significant credit card debt are also more reluctant to discuss money: Compared with parents who do not have more than $5,000 in credit card debt, parents with $5,000 or more in credit card debt are more likely to say that they are very or extremely reluctant to discuss finances with kids (35% vs. 21%). Additionally, their kids are more likely to say:

  • Their parents sometimes confuse them when they talk about money (67% vs. 51%)
  • What their parents tell them about money is sometimes different than what they hear at school (65% vs. 53%)

Additionally:

Parents with troubling financial habits are more likely to have pulled money from retirement savings: 44% of all respondents have pulled money from their retirement savings during the past two years. But parents who have declared bankruptcy at some point in their lives are twice as likely to have recently pulled from retirement savings (74% vs. 37%). Similarly, parents with $5,000 or more in credit card debt are significantly more likely to have pulled money from retirement (62% vs. 37%).

They are also more likely to have pulled money from their kids’ college savings: Parents who have at some point declared bankruptcy are more than twice as likely to have pulled money from their kids’ college savings in the past two years (69% vs. 25%). Likewise, parents who have more than $5,000 in credit card debt are significantly more likely to have pulled money from their kids’ college savings recently (50% vs. 26%).

Parents with troubling financial habits are more likely to have other kinds of debt: Parents who have declared personal bankruptcy at some point in their life are significantly more likely to currently have over $5,000 in credit card debt (68% vs. 42%). They are also more than twice as likely to have payday loans (22% vs. 10%).