Family budgets: Who is paying?

When families help each other out financially, who typically pays: Older family members supporting the younger ones, or vice-versa?

Despite the growing wave of retiring Baby Boomers, it’s far more likely to be older Americans transferring cash to their adult children or grandchildren than the other way around, according to recent research by EBRI.

EBRI’s analysis shows that a very small portion of older households receive transfers from their younger generations, while a much larger section of older households transfer money to their younger generations. The amounts transferred by older households are much higher than what they receive. These transfers are highly correlated with income.

Specifically, EBRI found that from 1998 through 2010, there has been an increasing trend of transfers going from older households (those where at least one member of the household is ages 50 and above) to their family members. Very few older households (4 percent to 5 percent) receive cash transfers from their families, compared with those who transfer money (38 percent to 45 percent) to their younger family members.

During a two-year period between 2008 and 2010, the average amounts transferred by households who had at least one member between ages 50 to 64 and ages 85 or above were $8,350 and $4,787 respectively. The amount transferred from older Americans to their children and grandchildren generally goes down with age, but the average annual transfer amounts are large enough to be considered as a major spending item in a household budget.

Reprinted from Employee Benefit Research Institute, EBRIEF, June 29, 2015.

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