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How Much Are Your Grandkids Really Costing You?


Quick question: How much money do you spend each year on your grandchildren? The amount is probably larger – and more important – than you realize.

Grandparent households in the U.S. are spending an estimated $10 billion annually on basic needs, gifts and education for their grandchildren, according to “American Grandparents,” a new study from the MetLife Mature Market Institute. That support is coming at a critical moment: The past decade, the report states, “was one in which grandparent households did far better financially than the households headed by their offspring, who saw their real income either stagnate or actually decline.”

The study starts by correcting what it calls the “Norman Rockwell image” of grandparents as “aged and white-haired.” In fact, the majority of grandparents today – 53% of grandmothers and 54% of grandfathers – are Baby Boomers under age 65. In all, there are an estimated 65 million grandparents in the U.S, or one out of every four adults. By 2020, the ratio is expected to be nearly one in three adults.

(MetLife also notes that one in every 10 households headed by someone who is a grandparent has at least one grandchild living with them. Part of the reason: high unemployment among their grandchildren’s parents.)

Significantly, the report finds that “American grandparents today are, as a group, better off financially than at any time in the past.” In the past decade, the percentage of inflation-adjusted household income that accrued to households ages 55-plus jumped to 34% from 28%, according to MetLife. That translates to a real income increase for those households of $659 billion.

By contrast, during the same time frame, the total real income of households ages 25 to 44 declined to 36% from 43% – a real aggregate income loss of $312 billion.

And what did grandparents do with their newfound wealth? A good portion of it went to their grandkids. In particular, households age 55-plus spent $7.6 billion in 2009 on baby food, infant equipment, clothing, toys, games and tricycles. That’s an increase in spending of 71% from 1999.

At the same time, households ages 55 and older spent $2.43 billion in 2009 on primary and secondary school tuition and supplies. That figure is 2.5 times as large as educational expenditures in 1999.

The upshot: The youngest generation – which some economists warn may not do as well financially as their parents – could up benefiting in later life from their grandparents’ generosity.

“Large numbers of grandparents,” the report concludes, “are making substantial commitments of their time and personal resources to ensure that this core value [of continuing generational economic progress] is maintained.”


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.