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Banking on Grandma & Grandpa: How Canada’s Grandparents are Sacrificing Their Savings to Support Adult Children and Grandchildren

By Diane Amato

Published July 19, 2024 • 4 Min Read

TLDR

  • According to a recent RBC poll, 21% of grandparents are supporting at least one adult child aged 25+ and 30% have provided money to grandchildren.

  • 54% of the 21% of grandparents are sacrificing their savings and 33% are worried about running out of money.

  • Grandparents are under pressure, with 70% reporting their adult children expect them to help cover basic living expenses.

  • This troubling trend is jeopardising grandparents’ ability to support their financial future.

It’s not unusual for grandparents to provide financial assistance to younger generations, especially when it comes to education and housing. But what was once a desire to help, has become a necessity, as grandparents are increasingly called upon – and expected – to pitch in to help cover everyday living expenses for their adult children and grandchildren.

Canadians of all ages are feeling the pinch in today’s economy, and many grandparents have been dipping into their retirement savings to provide support. But in doing so, they’re putting their own financial stability and retirement plans at risk.

The cost of helping out

According to the 2024 RBC Family Finances Poll – Grandparents Edition, 21% of grandparents are supporting at least one adult child aged 25+ and 30% have provided money to their grandchildren. Among those surveyed, more than half (54%) indicated they are sacrificing their own savings to provide this assistance to their family members, and more than half (52%) have made, or would need to make, significant lifestyle changes to continue their financial support. In addition, over 20% have taken on debt to provide this financial assistance and more than a third are worried about running out of money. In other words, they are jeopardizing their own lifestyles and future plans to provide a helping hand today.

The impact of helping out

And this isn’t once-in-a-while type of support. 70% of grandparents surveyed said that their adult children expect them to help cover necessary costs such as food and clothing and many (54%) are providing this money at least monthly. This consistent outflow of cash can be difficult to keep track of (especially when it’s unexpected) and can be a persistent drain on older adults’ finances.  “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,” says Craig Bannon, Director, Financial Planning Centre of Expertise, RBC.

Tips for grandparents

Whether approaching or living in retirement, Canadian grandparents must be able to rely on their savings to support their own financial futures. While there may be strong motivation to support adult children and grandchildren who need a hand, it’s important to balance their financial contributions with protecting their own needs. Here are some ways to try and achieve this balance:

  • Set expectations. When adult children expect financial support, it can not only be a financial drain on parents, but it can also put significant pressure on relationships. Having open conversations across generations can help the older generation understand what financial shortfalls might exist and help the younger generation understand the limitations of the “bank of grandma and grandpa”. Speaking openly and honestly about finances can help ensure resources aren’t overstrained and there are fewer surprises to navigate.

  • Have a plan. Once needs are identified, it’s a good idea to put a plan together that includes how much money will be provided and how that fits into the grandparents’ budget. A financial advisor can help create this plan, to help ensure grandparents have enough cashflow and provide advice on how to stay financially healthy.

  • Keep track. According to the poll, 43% of grandparents don’t know how much money they have provided to their adult children, and 34% don’t know how much has been given to grandchildren. For those living on a fixed income in particular, it is crucial to know how much is going out so there isn’t a critical financial gap later. To that end, it’s important to understand how financial support provided today can affect future financial stability.

While the current economy is putting enormous strain on many Canadian families, relying on grandparents is a troubling trend that can put older Canadians’ futures at risk. Having open communications about family finances, setting clear expectations and having a long-term plan in place – for everyone – can help all generations achieve financial stability.

For more information about the 2024 RBC Family Finances Poll – Grandparents Edition, view the RBC press release.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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