Despite older Americans having a difficult time coming up with and maintaining funds for their retirement years, grandparents seem to have no problem doling out large sums of money for their grandkids’ expensive post-secondary tuition rates. A new study finds seniors are paying for the college experience all over again and that this is an emotional decision rather than a fiscally prudent one.
New research from Fidelity Investments finds that grandparents are allocating tens of thousands of dollars of their own resources into their children’s college funds. According to the survey, more than half (53 percent) is already saving or are starting to plan to save for their grandchild’s college education. Also, 47 percent are considering including college savings for their grandchildren in their long-term financial strategies and estate.
More than one-third (35 percent) noted that they contribute to college savings on a monthly basis, while another 35 percent contribute in the form of special gifts. The average median contribution was $25,000, but more than one-third (35 percent) have plans on giving a minimum of $50,000.
Although the grandparents are attempting to do the right thing for their family, they might be sacrificing their own golden years for the sake of their grandchild. Nearly half (47 percent) of the older respondents said they are concerned about their own retirement savings.
“For many families, saving for college has become a team effort, and many grandparents aren’t content to sit on the sidelines,” said Keith Bernhardt, vice president of college planning at Fidelity, in a statement. “Contributions from grandparents – big or small – can add up over time and potentially open up a grandchild’s opportunities when making college decisions. Ongoing communication between parents and grandparents can help when determining how to grow their savings, as well as how to best leverage those savings to pay for college when the time comes.”
Previous data (PDF) has shown that Americans simply can’t afford to fund younger adults’ education. Parents aren’t saving for retirement, including those born between 1962 and 1981 who have dropped their median savings by 15 percent over the past two years. Also, close to half of the youngest Baby Boomers have less than $100,000 put away for their winter years (PDF).
Of course, not only are families contributing to a child’s college tuition rate. Once they graduate they’re also living at home – hence why parents today are called the”sandwich generation.”
A Bloomberg News article suggests that grandparents might be wasting their own money on their grandkids’ degrees. John Schmitt, a labor economist for the Center for Economic and Policy Research in Washington, told the news outlet that most of the latest college graduates have found employment positions that do not require a college diploma.
The Fidelity online survey was conducted with 1,001 adults aged at least 45 between Apr. 9 and 18.
