Can grandparents fill spending gap on grandchildren in recession?

Articles
May 08, 2009

Can grandparents fill spending gap on grandchildren in recession?

One of the great privileges of growing older is having grandchildren to coddle. With so many Boomers active, healthy and mentally sharp, grandparents can throw themselves into these relationships rather than be emotionally passive or distant. (Boomers will comprise 51% of the grandparent population by 2010 and nearly 60% by 2015.) Shopping for grandkids is high on their list. Especially in a down economy, a grandchild’s smile looks like the most lasting and valuable currency, and that motivates store trips and purchases in an array of categories. “When the economic history of this recession is written, it will likely show increased spending by grandparents on grandchildren to compensate for reduced incomes of their adult children,” states the first-ever study of The Grandparent Economy, commissioned by grandparents.com and conducted by Peter Francese, the founder of American Demographics. “America’s grandparents are one of the most powerful and underestimated drivers of the United States economy…Grandparents control the majority of financial assets in the U.S. today,” the study reveals. By the end of 2009, the U.S. will have more than 70 million grandparents, a group far larger than the 13- to 19-year-olds, frequently coveted by marketers, who number 30 million. The number of grandparents is increasing at more than double the rate of the overall population, the study reports. They lead 37% of U.S. households, and are at an all-time-high ratio of three out of every 10 adults. They have the highest average net worth of any age group at $254,000. And by 2010, households headed by 55- to 64-year-olds will earn the highest average income, surpassing that of families headed by 45- to 54-year-olds for the first time.

One of the great privileges of growing older is having grandchildren to coddle. With so many Boomers active, healthy and mentally sharp, grandparents can throw themselves into these relationships rather than be emotionally passive or distant. (Boomers will comprise 51% of the grandparent population by 2010 and nearly 60% by 2015.)

Shopping for grandkids is high on their list. Especially in a down economy, a grandchild’s smile looks like the most lasting and valuable currency, and that motivates store trips and purchases in an array of categories. “When the economic history of this recession is written, it will likely show increased spending by grandparents on grandchildren to compensate for reduced incomes of their adult children,” states the first-ever study of The Grandparent Economy, commissioned by grandparents.com and conducted by Peter Francese, the founder of American Demographics.

“America’s grandparents are one of the most powerful and underestimated drivers of the United States economy…Grandparents control the majority of financial assets in the U.S. today,” the study reveals.
 
By the end of 2009, the U.S. will have more than 70 million grandparents, a group far larger than the 13- to 19-year-olds, frequently coveted by marketers, who number 30 million. The number of grandparents is increasing at more than double the rate of the overall population, the study reports. They lead 37% of U.S. households, and are at an all-time-high ratio of three out of every 10 adults. They have the highest average net worth of any age group at $254,000. And by 2010, households headed by 55- to 64-year-olds will earn the highest average income, surpassing that of families headed by 45- to 54-year-olds for the first time.

So how much do grandparents dole out? Their spending on grandchildren has grown an average 7.6% annually since 2000—nearly twice the average annual growth rate for consumers overall. The report anticipates their 2009 spend will be $2 trillion (one-third of consumer spending overall), of which approximately $52 billion will go toward goods and services for their grandchildren.

Much of their annual spend on grandchildren will be channeled toward educational and travel expenses. But retailers will sell them: $2.1 billion worth of baby and child food, furniture and equipment; $4.3 billion worth of toys, games, arts and crafts and bicycles/tricycles; $6.2 billion worth of apparel and footwear.

While grandparents may indeed represent a deep reservoir of spending for CPG brand marketers and retailers to mine, we at SupermarketGuru.com find that this welcome report is highly optimistic in tone and glosses over many money challenges faced by seniors in this economy.  We feel there are plenty of grandparents compromised by health conditions who still choose between taking their medications and buying food and other essentials. If they’re clipping coupons, can they afford to pay tuition? We also suspect the retirement dreams of many have been dashed this past year, and that even grandparents who would like to be more generous need to rein in their spending. We’d like to see future studies (they say this is first in a series) be more tempered by today’s fast-shifting realities.