MONEY SENSE
ARE YOU RISKING YOUR FINANCIAL FUTURE TO SUPPORT A SON OR DAUGHTER?
21% of Canadian grandparents aged 55 plus are currently supporting at least one adult child aged 25 plus and 30% have provided money to their grandchildren – and this financial assistance comes at a high cost. Image credit: NEWS CANADA.
Canadian grandparents are finding themselves caught in a money squeeze, as the high cost of living is having a big impact on both their own finances and the financial support they're providing to two generations – their adult children and their grandchildren.
According to the 2024 RBC Family Finances Poll – Grandparents Edition, which surveyed grandparents aged 55 plus, 21% are currently supporting at least one adult child aged 25 plus and 30% have provided money to their grandchildren – and this financial assistance comes at a high cost. Among the grandparents surveyed who are currently providing financial support to their adult child(ren) and/or have gifted money to their grandchild(ren):
Majority (54%) are sacrificing their own savings to provide this assistance
Majority (52%) have made or would need to make, significant lifestyle changes to continue providing this assistance
One-third (33%) are worried they will run out of money to maintain support and cover their own costs
Only 37% have reviewed their finances to see what they could afford to provide today
Only 20% have considered how their support could impact their retirement plans
Leaning on Grandma and Grandpa for 'need to haves', not 'nice to haves'
Poll findings indicate that many grandparents are also feeling increasing pressure to provide financial support. Seven-in-ten (70%) reported their adult children expect them to help cover necessary costs – such as food and clothing – and the majority (54%) are providing this money at least monthly. For grandchildren, support for everyday living costs (30%) is second only to education expenses (39%).
"While it's not unusual for grandparents to provide financial assistance to younger generations, the dramatic difference today is this support has become a necessity, rather than simply a desire to help," said Craig Bannon, director, Financial Planning Centre of Expertise, RBC. "This can be a financial drain that grandparents haven't included in their budget. The closer they get to retirement, the bigger the impact unplanned costs such as these can have on their retirement savings. And for those who are already retired and living on a fixed income, these added expenses can pose an immediate risk."
Also of concern is the number of grandparents who admitted they don't know how much money they have provided to their adult children (43%) or grandchildren (34%).
"If you're covering essentials for younger family members on an 'as needed' basis, it can be challenging to keep on top of these amounts and how they are affecting your cash flow and savings," explained Bannon. "Regardless of how much or how often you're providing this support, we can help you try to find a comfortable balance between what you want to provide and what you can afford to spend, so you can also meet your own needs, today and in the future."
A trio of tips to help keep finances healthy
To help grandparents keep their own finances healthy while assisting their adult children and their grandchildren, Bannon shares three tips.
Have open conversations with your adult children early and often. This will ensure expectations are clearly understood, and existing or upcoming financial support doesn't overstrain your own resources.
Connect with a financial advisor who can help you build a plan that includes how much money you expect to provide and see how that matches your current cash flow. Once that's set up, check your plan regularly to stay on track.
Look beyond today, especially as you get closer to retirement. It's important to understand how any financial support you are providing now may affect your savings and your ability to cover your own future costs.
Additional financial advice and resources can be found at rbc.com/mymoneymatters.