Many grandparents feel compelled to provide financial support to their children, often to meet basic needs. This generosity sometimes comes at the expense of saving for retirement, a new survey suggests.
According to the RBC survey of Canadian grandparents aged 55 and older released this week, 70 per cent of respondents said their adult children (aged 25 and older) expect help with essential daily expenses, such as food and clothing.
Among those who said they provide financial assistance to their children or grandchildren, 54% contribute an amount for these essential needs at least once a month. In the eyes of RBC financial planner Brigitte Felx, the acceleration of inflation in recent years can explain this reality. “What the survey shows is that in terms of the nature of the support, it is no longer necessarily just the desire to help. It is becoming a necessity. We see that many grandparents feel more and more obliged to provide financial assistance,” she comments in an interview.
What also particularly strikes the financial planner in the survey results is the impact of this boost on savings.
Among respondents who are currently helping at least one adult child (21%) or who have given money to their grandchildren (30%), more than half said they are sacrificing their own savings to provide this support. Also, a third of donor respondents fear running out of money and no longer being able to pay their own expenses. “There is an impact and even an immediate risk in terms of finances for these grandparents. Will they be able to succeed in their retirement and have the income necessary to live well in retirement? These statistics concern us as financial planners,” says M.me Felx.
Have a financial plan
RBC recommends that grandparents have a “frank conversation” with their children as early as possible to ensure that the assistance provided is within their financial capacity. “It’s about having a clear understanding of expectations on both sides,” says the financial planner.
It is also worth considering consulting a financial advisor. They will be able to develop a plan that includes an amount for younger people that is appropriate for current liquidity, the banking institution also suggests.
In fact, just over a third of donor respondents (37%) said they had analyzed their finances to see how much support they could currently provide. And even fewer (20%) had thought about how this support would impact their retirement plans.
Many said they didn’t know how much they gave to their adult children or grandchildren. But based on those who tracked their giving, the average annual amount given to an adult child is nearly $7,000. For cash and gifts given to grandchildren, the average is about $4,000, according to the RBC survey.
Having a financial plan that includes goals removes a lot of stress and emotion, emphasizes Brigitte Felx. “We want to help in the present moment, but we must always look to the long term because most people aged 55 and over will necessarily retire in the coming years. So, planning and looking to the future is also necessary,” she maintains.
The emotional aspect can play a role in the feeling of having an obligation to offer support to loved ones, she notes. “I think that as parents, we really care about helping our children. We want them to succeed and get off to a good start in life. Personally, having a young person who is almost 25, I can very well understand how much it can affect grandparents to want to help,” she says.
The survey was conducted online among members of the Angus Reid Forum. More than 1,500 Canadian grandparents aged 55 and over with adult children aged 25 and over were surveyed for the survey. The margin of error for a sample of this size is plus or minus 2.5 per cent, RBC says.