When it comes to helping their children and grandchildren, Canadian grandparents are very generous. Perhaps too generous, with many sacrificing their own savings to financially support their descendants, according to a Royal Bank of Canada (RBC) survey released Wednesday.
One-fifth of respondents (21%) report financially supporting at least one adult child aged 25 and over, for an average annual amount of $6,945. In addition, 30% of grandparents surveyed report having given money to their grandchildren, to the tune of $4,002 on average.
Among donor grandparents, 54% say they have sacrificed their own savings to provide financial assistance to their offspring. A similar proportion (52%) say they have made significant changes to their lifestyle habits to provide this support.
This generosity is not without consequences: a third (33%) of respondents who offer financial help fear running out of money to pay their own expenses and to continue helping their children, while a fifth (21%) say they have taken out a loan to provide financial support.
“It’s not uncommon for grandparents to provide financial support to younger children, but there’s a huge shift now in the nature of that support, as it’s become a necessity, rather than just an expression of a desire to help,” said Brigitte Felx, a financial planner at RBC, in a statement.
In fact, 54% of grandparents who support their adult children do so to help pay for daily living expenses, such as food and clothing. Seven in 10 (70%) admit that their children expect contributions to cover these types of expenses.
The aid provided to grandchildren is mainly used to pay for education-related expenses (39%), although 30% of contributions are intended for living expenses.
Retirement at risk
“This can be an unexpected financial burden on grandparents’ budgets. As retirement approaches, such unexpected costs increasingly impact their retirement savings. In addition, these additional expenses can pose an immediate risk for those who have already retired and are living on a fixed income,” says Brigitte Felx.
She is concerned about the proportion of grandparents who say they do not know how much money they are giving to their children (43%) and grandchildren (34%). Only one-fifth (20%) of respondents who have given a gift have thought about how this help will impact their retirement plans and 37% have analysed their financial situation to determine how much help they can offer.
“If you pay for essential expenses for younger family members based on need, it can be difficult to keep track of all the amounts you’re paying and how they’re affecting your cash flow and savings,” says M.me Felx.
The survey was conducted online by Angus Reid from April 4 to 10 among 1,508 Canadian grandparents aged 55 and over with children aged 25 and under. The margin of error for a probability sample of the same size would be 2.5%, 19 times out of 20.