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In a recent survey of 600 grandparents age 50 and above, one thing became clear right away: they want to help their grandchildren financially. But concerns about their own financial future and limited use of long-term investments get in the way.
Those were among the key findings of a first-of-its-kind survey recently conducted by AARP Financial Inc. to better understand grandparents' attitudes and behaviors in support of their grandchildren. The AARP Financial Inc., survey included those responsible for financial decision making in their households.
The good news? No matter what the circumstances, there are many things that grandparents can do today to make a more meaningful contribution to their grandchildren for the future, while imparting a critical life lesson about the importance of saving and investing.
If you want to help with summer camp, supporting a hobby or college expenses but feel the pinch of your own finances, you aren't alone. And you may be able to do something about it. Here are some of our key findings:
Of those who provide little or no substantial contributions to their grandchildren:
42% had concerns about running out of money as they age
45% felt the need to conserve for medical expenses
55% had a lack of resources
And, in general, giving tends to be event focused, rather than goal focused:
78% haven't opened savings/investment accounts for grandchildren
79% haven't heard of a Coverdell Savings Account (Education IRA)
93% haven't heard of a UGMA/UTMA
Fortunately, investing in and for children has the built-in advantage of time. Which lets you take full advantage of the power of compounding. So even modest investments, such as $25 per month, have a chance to grow in long-term higher growth investments such as mutual funds.
Grandparents appreciate recognition for the gifts they give. In fact, over half (54%) of grandparents who provide financial contributions or gifts said they would be very or somewhat likely to stop or limit support if they felt their grandchildren did not appreciate it. Hands-down, an in-person thank you is deemed the most appropriate way for a grandchild to thank them for a gift, cited by 46% of grandparents who currently provide support to grandchildren school-age or older. A phone call was next at 28%. Only 2% thought an e-mail was the most appropriate way to say thanks.
The AARP Financial Inc. research demonstrates that grandparents are committed to helping their grandchildren and derive great joy in giving them gifts.
At the same time, many grandparents are not using — nor are they even aware of — the valuable saving and investing tools that can help them make the most of what they give.
As more and more Americans enter their grandparenting years — and as price tags on big ticket items like homes and a college education continue to rise — grandparents are likely to play an increasingly important role in the financial lives of their grandchildren.
If you're interested in learning more about how to help your grandchildren have a brighter financial future, take a few minutes to speak to a Financial Advisor; call
1-866-218-6142, Monday to Friday, 8:00 a.m. - 6:00 p.m. Eastern Time.
The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, or legal, tax or investment advice, or a legal opinion. Individuals should contact their own professional tax or investment advisors or other professionals to help answer questions about specific situations or needs prior to taking any action plan based on this information.
The Financial Advisors are investment adviser representatives of AARP Financial Inc., an investment adviser.
