Intervivos Giving in the Older Population: Who Receives Financial Gifts from the Childless?

Intervivos financial transfers from older parents to their adult children or their grandchildren are widespread in the United States. For example, among parents aged 51 or older about 35% gave a financial transfer to their children or grandchildren over a two-year time period (Hurd, Smith and Zissimopoulos, 2006).1 These transfers are not simply for educational expenses. Indeed much older parents whose children are beyond school-attending ages give financial transfers at high rates: among parents aged 76–80 the rate was 27% over a two-year period. Yet, transfers by children to their parents are much less frequent: Just 4.9% of parents aged 51 or over report receiving a financial transfer from their children.2 Even much older parents, who might be financially needy, receive transfers only infrequently from their children: among those 80 or older just 6.3% report such a transfer over a two-year period. A general conclusion, which is also found in European data, is that financial transfers are predominantly from the older generation to younger generations, including grandchildren.3 The leading hypothesis to explain financial gifts is the altruistic motive for giving. Its main assumption is that the giver cares about the well-being of a particular person (Barro, 1974; Becker, 1974, 1981). An additional assumption, which is well founded in economic theory, is that a given level of financial transfer can increase the well-being of a poor person more than the well-being of a wealthy person. With this addition, an implication of altruistic giving is that financial transfers will be targeted more frequently to the poor. The patterns of transfers to children support this altruistic motive: the frequency of giving is greater to the child who is the least well-off in multi-child families. The altruistic motive is also supported by data on financial transfers from middle-aged children to their elderly parents: the frequency of giving is greater when the parents are less well-to-do (McGarry and Schoeni; 1995, 1997). Other hypotheses to explain financial gifts involve some type of reciprocity. The reciprocity can be explicit such as actual gifts or the giving of attention. Or the reciprocity can be implicit such as establishing or strengthening social networks. The latter type of reciprocity is difficult to study among families with children: all have presumptive social networks. Financial transfer behavior by the childless is both more simple and more complex. Lacking children, it may be that the childless simply make fewer transfers. But, because they have to shift the target of giving away from children, their decisions are more complex in that there are a number of targets of approximately equal attractiveness. However, even the basic facts of which targets are chosen and how those targets vary with observable characteristics are not known. The primary aim of this paper is to document the facts about financial transfers by the childless and to study the patterns of those transfers. An additional aim is to find whether these patterns reveal something about the motivations for the transfers. Should that be the case, the results should provide a basis for forecasting how financial transfers will change with the increasing childlessness we observe both in the U. S. and in Europe.