Too Cute to Fail: Grandparents Bailing Out Their Grandchildren

When times get tough, big banks and auto companies have the government to bail them out. Kids have their grandparents.

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When times get tough, big banks and auto companies have the government to bail them out. Kids have their grandparents.

No kidding. One in four grandparents stepped up their financial support of grandchildren during the recession, a MetLife survey found. And not all of them could afford it. According to the survey:

“These grandparents are stepping up to help in these difficult economic times, even though many say it is having a negative impact on their own finances.”

That’s love, and here’s what it looks like in cold hard cash: Two in three grandparents gave money to their grandchildren in the past five years. Most gave less than $5,000. But the median amount given was $3,000; the average, $8,661. So we’re talking about more than a juiced birthday card. Much of the giving was for education (26%) and major life events (21%). From the survey:

“Of those helping with their grandchildren’s education, 46% are contributing to a fund established for college. One-quarter (26%) are currently paying, or planning to pay, for at least part of their grandchildren’s expenses for preschool, elementary, middle school, or high school, while 24% are currently paying, or planning to pay, for their grandchildren’s college tuition or college loans.”

Today’s grandparents overwhelmingly agree that it is important to distribute smaller gifts as needed throughout life rather than wait and leave a substantial financial legacy at death. Yet they are not being meddlesome. Two in three grandparents say they do not seek to advise their grandchildren on money matters.

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With baby boomers now accounting for a large and growing number of grandparents, this intergenerational largesse puts an interesting spin on the generation that is supposed to be bankrupting society with its entitlements and massive numbers. Boomers, it seems, are giving back plenty on the family front. Other surveys have found that boomers are active volunteers. The “Me” generation is morphing into the “We” generation and just might provide value to society through giving of time and money for years to come. From the survey:

“Those with lower incomes are providing more assistance now than in the past. One-third (34%) of those earning less than $35,000 compared to 20% of those earning $50,000 to $74,999 are providing more assistance.”

There are 65 million grandparents in the U.S., up from 40 million in 1980 and on the way to 80 million by 2020, when one in three adults will be a grandparent. The good news is that this crop won’t be acting like old fogies anytime soon, at least not en masse. They command the lion’s share of household income right now and are more likely to be college graduates and fully employed than any previous generation of grandparents.

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Many grandparents have seen substantial increases in their household incomes the past decade even as their offspring have struggled. The incomes of households headed by those ages 55 or older rose by $491 from 2000 to 2009, while those headed by ages 25-44 saw their incomes decline. That helps explain why grandparent spending on child-specific items has surged.

According to the survey, households headed by those 55 and older are spending $2.4 billion annually on primary and secondary school tuition, up 2.5 times since 1999.

This is one bailout it seems the government can leave to others.