With Baby Boomers being the wealthiest generation in history who are living longer and enjoying better health than previous generations, it’s no surprise that their role in Australian families has changed dramatically. More than ever before, grandparents have become active carers and contributors, alleviating pressure on the stretched household budgets and schedules of their children.
That grandparents have become secondary carers to grandchildren as the cost of childcare skyrockets is well known. Recent research has revealed that, on average, Aussie grandparents are caring for grandchildren for 58 hours per month, the equivalent of $328 million nationally in monthly childcare fees.
What is also widely known is that on a global scale, we are on the cusp of the largest wealth transfer in history, with Australia set to see more than $3 trillion change hands over the next couple of decades as Baby Boomers pass on their wealth. It’s clear the Bank of Mum and Dad has become one of the nation’s top lenders.
The issue for most, however, is how they can help the next generation without putting a dent in their retirement savings and quality of life. Take the example of education. Today, education is up there with some of life’s major expenses like purchasing property and saving for retirement. Education costs over the years have far outpaced inflation. While inflation, as measured by CPI, rose 11 per cent over the past five years, education jumped by an enormous 28 per cent. And, according to the ABS 2015-16 Household Expenditure Survey, the largest increase in household spending was in education, which jumped by 44 per cent in six years.
Attuned to the soaring costs of both public and private education tuition as well as tertiary studies, it’s no wonder that grandparents are increasingly considering how they can support their grandchildren’s education. One way to make a meaningful contribution is for grandparents to invest in education savings. Education funds enable parents and grandparents to make regular contributions of any size, earn interest on their savings and benefit from tax incentives.
Another idea for grandparents is to reconsider gift-giving. What would typically be spent on a present could instead be gifted or rather invested in an education fund. While savings in an education fund may not cover all education costs, it can alleviate some pressure, particularly when it comes to incidental costs like excursions, sporting equipment, laptops, instruments and exchange programs that can easily add tens of thousands of dollars to education fees every year.
Contributions to education savings will, over time, make a big difference. And, although toys and “things” provide children with joy, an education is the greatest gift of all.
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