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Grandparents Raising Grandkids: Money Squeeze

A new report describes the strain on low-income grandfamilies

By Richard Eisenberg

Finances are often tight for older Americans, but a new report reveals they can be especially oppressing for many low-income grandparents caring for their grandchildren.

There are about 2.7 million such grandparents heading what are known as “grandfamilies” or “kinship families” and more than one in five live below the poverty line, according to The Resounding Resiliency of Grandfamilies, the report issued by Generations United and the Corporation for Enterprise Development (CFED), a group that empowers low-and moderate-income households to build and preserve assets.

“The number of grandfamilies in America has been growing and we expect that to continue,” said Donna Butts, Executive Director of Generations United, which aims to improve the lives of kids and older adults. “Some of this is due to the population increase of older adults, but a lot has to do with poverty, substance abuse, the death of a grandchild’s parent and extended military deployment.”

The Number One Reason for Grandfamilies

A Boston Globe story, cited in The Grandparent Economy, a new book by Lori Bitter, says addiction is the top reason grandparents now take over care for their grandchildren. But grandfamilies have been around as long as our nation has. In Bitter’s book, Butts notes that George and Martha Washington raised grandchildren at Mount Vernon.

Sadly, many of today’s low-income grandparent caregivers — sometimes great-grandparent caregivers — find themselves forced to cut into their own retirement finances and “defer their dreams” so they can “prioritize the dreams of their grandchildren,” said Butts, whose group also runs The National Center on Grandfamilies.

As the report noted: “Instead of saving for retirement, grandparent caregivers may suddenly find themselves saving for college.”

Robbing Peter to Pay Paul

One Chicago, Ill. grandmother interviewed said: “By the time I finish paying the bills and I also tithe, I pray that nothing comes up because I have nothing to give. I’m just making it. Or, as they say, I’m robbing Peter to pay Paul.”

Compared to grandparents who aren’t raising their grandkids, grandparent caregivers are more likely to be living in poverty, more likely to be working at least part-time and more likely to be disabled, according to the report.

The Resounding Resiliency report — based on interviews from 20 grandparent caregivers in Chicago, Ill., and Trenton, N.J. — describes the difficulties some of these generous souls face. The average annual income of the households interviewed was $25,414; the primary source of income for most of the caregivers was Social Security.

A few of the grandparents interviewed said they had to cut back on hours or take a leave from their job to care for the children, which, of course, lowered their income.

“And because they have limited incomes — some are retired and on fixed incomes — their abilities to get a new job are harder,” said Pamela Chan, Associate Director of Applied Research for CFED and one of the report's co-authors.

Spending Down Retirement Savings

Over and over, Butts told me, “we heard from ones who spent down their retirement savings or mortgaged their houses, whatever they needed to do to support their grandchildren.”

Additionally, the report notes, there may be significant legal fees and court costs as the grandfamily caregiver tries to gain legal custody of the grandkids. One grandmother interviewed, fighting for guardianship of her grandson, had an attorney’s bill of $7,000 just for one month. She drew down nearly all her savings accounts to cover legal expenses.

And yet, “one of the most important things I took from this study is how incredibly capable grandfamily caregivers are,” said Chan. “Knowing how to manage a household budget and raise a family isn’t new to them, but it’s so much harder at their age and lifestage.”

As one grandmother interviewed for the report said: “It’s like starting a family all over again, but I don’t have the energy.”

How Having a Grandfamily Can Be Enriching

Caring for a grandchild, however, can also enrich a grandparent’s life, the report found. Zoey, a great-grandmother raising her 15-year-old grandson with special needs told an interviewer: “It’s a little rough when you are old, take on a new kid. But it gives you something to live for.”

Strikingly, some of the grandparent caregivers felt that some assistance programs essentially discouraged them from saving for the future. The programs’ asset limits or asset tests could cause them to lose eligibility if their savings accounts grew too large.

Said a Trenton grandmother: “They see that you have a little money and they think, ‘oh you can afford things.’”


What Could Be Done to Help

The Generations United/CFED report also urges federal and state policymakers to explore ways to broaden eligibility of their programs for grandfamilies, remove barriers to benefits, services and employment and remove asset limits so the families could save more without being penalized.

“There are so many hoops grandfamily caregivers have to go through to demonstrate they are taking care of a child,” said Chan.

Added Butts: “Many policies to support people are not designed with grandparents or older relatives in mind. We need to make exceptions so grandparents have the ability to plan for retirement and take care of their children.”

Raising Awareness Among Caregivers

The authors also want to raise awareness among grandfamily caregivers about benefits they may be entitled to receive, such as financial assistance for becoming a licensed foster parent. Only one of the 20 caregivers interviewed was a foster parent.

In addition, just 12 percent of grandfamilies receive Temporary Assistance for Needy Families (TANF), even though nearly 100 percent are eligible, according to the report. Less than half of low-income grandfamilies get SNAP (Supplemental Nutrition Assistance Program), once known as food stamps.

“Some of these grandparents don’t know about the additional support,” said Butts.

Some communities, Butts noted, have what are known as “kinship navigator programs” — information clearinghouses for grandparents. “If there were one-stop centers for grandparents everywhere, the grandparents could get correct information and know about benefits. Many of them don’t know where to start.”

Legislation That Might Be Useful

Washington, D.C. has mostly ignored this issue, but Rep. Mark Veasey (D-Texas) recently reintroduced his Grandparents Tax Credit Act. This bill would provide a $500 refundable tax credit to grandparents who serve as caregivers for their grandkids. (At age 10, Veasey moved in with his grandmother, along with his mother and brother.)

Sen. Ron Wyden (D-Ore.) is pushing his Family Stability and Kinship Care Act, which would allow states more flexibility with their family services programs to reduce costly and traumatic stays in foster care. It is cosponsored by seven other Democratic Senators.

Advice for Grandparent Caregivers

I asked Butts what advice she’d offer grandparents caring for grandkids to help ease their financial pressure and duress. “Ask, ask, ask” about financial resources and supports to help you and your grandchildren, she replied. Local area agencies an aging and child welfare agencies could offer information.

And, she added, “don’t be afraid to ask members of your extended family for support.” Said Butts: “Don’t feel you have to do it all yourself.”

Photograph of Richard Eisenberg
Richard Eisenberg is the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of "How to Avoid a Mid-Life Financial Crisis" and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Read More
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