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Grandparents play an increasingly important role within family dynamics, particularly in caring for their grandchildren. According to the latest 2019 joint report by the OECD and the Bank of Italy, the Italian household saving rate now stands at 7.7% of gross household income, a figure in steady decline. Consider that in 1990 it was 20%.
Compared with other European countries, Italy has lost a long-held advantage: today Italian households save only about half the EU average, which is 13.8% of income.
What does this mean in practical terms? A family with a monthly income of €3,000 can now set aside barely €230, whereas in 1990—often with one or two more children—such a family could save roughly 38% more each month. As a result, more and more grandparents find themselves supporting grandchildren financially.
The reasons for this erosion of savings are many, including employment difficulties, low wages, and economic stagnation.
Dependent Grandchildren: A Form of Generational Welfare
At the same time, we are witnessing a kind of “generational welfare.” A study by the National Bureau of Economic Research shows that over the past 30 years there has been a massive transfer of wealth from older to younger generations, a trend that has become firmly established.
Relative to income, these transfers of money and assets have risen from 9% in 1995 to 18.5% in 2018, and they tend to increase further during periods of economic crisis.
This phenomenon is typical of Italian society, which still reflects a strongly “family-centered” model.
Before the 1970s the situation was reversed: the younger generations—benefiting from the economic boom—supported their elders through subsidies, assistance, and care.
Today, however, around 6 million retirees provide financial help to their children and grandchildren, while about 14 million pensioners live without support from family members.
Reasons to Embrace a New Paradigm
Here are three key reasons to adopt a new paradigm to secure the future of younger generations. This “invisible hand” in national accounts is critical to the financial well-being of many Italians and should not be squandered; it requires careful planning and foresight.
How can you best organize this “home help” from grandparents for their grandchildren?
- Request a structured financial plan with a long-term horizon—typically 10 to 20 years. This makes it possible to build a substantial amount (principal plus interest). For example: with a monthly investment of €300 over 20 years and an assumed net annual return of 3%, the total amount at maturity would reach approximately €98,200, of which €72,000 is capital and €26,200 interest—thanks to the power of compound interest, which Einstein famously called “the eighth wonder of the world.”
- Act early, anticipate possible revisions to gift and inheritance tax rules by planning ahead with tools such as donating the bare ownership of real estate or establishing a trust or fiduciary arrangement for property and investments. Note that, as of now, gifts or inheritances to grandchildren benefit from a €1 million exemption per grandchild, the same threshold reserved for spouses and children.
- Give grandchildren the freedom to choose their path The savings accumulated today can enable grandchildren to pursue major life goals—buying a home, starting a business, or studying abroad—at a time when the next generation will likely rely less on parental financial support. This is expected to be the first post-war generation that may struggle to fund such milestones, given parents’ current difficulty in saving.
The economic sustainability of future generations is a pressing issue. In other countries, significant effort is devoted to promoting financial literacy precisely to ensure that the next generation’s future is not compromised by poor financial decisions.
If you believe the future financial balance of your family could become fragile—or simply wish to plan the best way to support your loved ones—contact me for an initial consultation, free of charge.
Grandparents play an increasingly important role within family dynamics, particularly in caring for their grandchildren. According to the latest 2019 joint report by the OECD and the Bank of Italy, the Italian household saving rate now stands at 7.7% of gross household income, a figure in steady decline. Consider that in 1990 it was 20%.
Compared with other European countries, Italy has lost a long-held advantage: today Italian households save only about half the EU average, which is 13.8% of income.
What does this mean in practical terms? A family with a monthly income of €3,000 can now set aside barely €230, whereas in 1990—often with one or two more children—such a family could save roughly 38% more each month. As a result, more and more grandparents find themselves supporting grandchildren financially.
The reasons for this erosion of savings are many, including employment difficulties, low wages, and economic stagnation.
Dependent Grandchildren: A Form of Generational Welfare
At the same time, we are witnessing a kind of “generational welfare.” A study by the National Bureau of Economic Research shows that over the past 30 years there has been a massive transfer of wealth from older to younger generations, a trend that has become firmly established.
Relative to income, these transfers of money and assets have risen from 9% in 1995 to 18.5% in 2018, and they tend to increase further during periods of economic crisis.
This phenomenon is typical of Italian society, which still reflects a strongly “family-centered” model.
Before the 1970s the situation was reversed: the younger generations—benefiting from the economic boom—supported their elders through subsidies, assistance, and care.
Today, however, around 6 million retirees provide financial help to their children and grandchildren, while about 14 million pensioners live without support from family members.
Reasons to Embrace a New Paradigm
Here are three key reasons to adopt a new paradigm to secure the future of younger generations. This “invisible hand” in national accounts is critical to the financial well-being of many Italians and should not be squandered; it requires careful planning and foresight.
How can you best organize this “home help” from grandparents for their grandchildren?
- Request a structured financial plan with a long-term horizon—typically 10 to 20 years. This makes it possible to build a substantial amount (principal plus interest). For example: with a monthly investment of €300 over 20 years and an assumed net annual return of 3%, the total amount at maturity would reach approximately €98,200, of which €72,000 is capital and €26,200 interest—thanks to the power of compound interest, which Einstein famously called “the eighth wonder of the world.”
- Act early, anticipate possible revisions to gift and inheritance tax rules by planning ahead with tools such as donating the bare ownership of real estate or establishing a trust or fiduciary arrangement for property and investments. Note that, as of now, gifts or inheritances to grandchildren benefit from a €1 million exemption per grandchild, the same threshold reserved for spouses and children.
- Give grandchildren the freedom to choose their path The savings accumulated today can enable grandchildren to pursue major life goals—buying a home, starting a business, or studying abroad—at a time when the next generation will likely rely less on parental financial support. This is expected to be the first post-war generation that may struggle to fund such milestones, given parents’ current difficulty in saving.
The economic sustainability of future generations is a pressing issue. In other countries, significant effort is devoted to promoting financial literacy precisely to ensure that the next generation’s future is not compromised by poor financial decisions.
If you believe the future financial balance of your family could become fragile—or simply wish to plan the best way to support your loved ones—contact me for an initial consultation, free of charge.
