Cover: Helping Out and Paying Back

Helping Out and Paying Back

How Families Support the Elderly

Published 1997

by Lee A. Lillard

Research Brief

Who will help the elderly if entitlement programs are scaled back? Given the government's current fiscal pressures, it is not unlikely that American families may be asked to assume a larger and more direct role in providing medical and economic assistance for older family members. Playing such a role would be nothing new: before the establishment of Social Security and Medicare programs, families in this country were the prime source of support for the elderly. Even today, in less-developed parts of the world, productive middle-aged family members still routinely contribute to the needs of their aging parents. Direct family assistance, therefore, can be an alternative to government programs. What needs to be more clearly understood is how this alternative works.

Recent RAND research at the Center for the Study of Aging looked into transfers of time and money in Malaysian households in an attempt to gain insight into how and why family members of different generations help each other out.[1] The evidence indicates that, in general, such help is based on altruism—the special feelings that family members have for one another enable them to enter into implicit contracts that would be impossible to make with anyone else. Yet it is clear that altruism offers only part of the explanation, because the implicit agreements between members of different generations of the family can take several forms.

A Reciprocal Flow of Resources

The general pattern within most families is that parents pay for their grown children's education and that—years later—these children provide assistance to their elderly parents in the form of money, household help, or both. However, according to the study, the motives of parents and children participating in a reciprocal flow of assistance tend to vary from one family to the next. In some cases, the fundamental motive is to spread the joint wealth of the family across generations, either as a way of maximizing returns on investments or as a means of insuring family members against hard times. In other cases, it appears that parents and children enter into implicit contracts to do no more than exchange money for services.

Sharing the Returns of Educational Investments

The study found especially strong evidence for one approach to maximizing family assets—parents support their children's education with grants and loans, and children repay the investment in their education by providing parents with old-age support. This investment-repayment cycle is related to the existence of a rapidly growing national economy where returns on educational investments in children can be much higher than returns on savings or other kinds of investments. As demand for more skilled and educated workers increases, children who have a strong education are able to earn nearly three times what their parents earn. Once these educated children secure good incomes, they and their parents share the returns from the educational investment. The data show that children who reach high levels of education (obtaining a high school diploma or attending college) give more to their parents, as do the children who earn the highest incomes.

Insuring Against Hard Times

Another type of implicit contract between generations involves the sharing of risks. The general purpose of such arrangements is to give money and other kinds of assistance to those members of the family who happen to be most in need. In theory, this informal version of family insurance might be expected to help elderly parents during periods of financial difficulty as well as in times of poor health. The results of the study, however, reveal that parents do not normally obtain financial insurance benefits in this type of arrangement. When the income of parents drops, the younger generation rarely comes forward with economic support, probably because the parents are able to take advantage of widely available saving instruments and high savings rates in Malaysia. On the other hand, there is evidence of implicit family insurance operating in response to certain traditional old-age adversities: the data show that children typically come forward with higher levels of assistance to widows and to parents in poor health.

Exchanging Money for Time

The research also indicates that in some families the younger and older generations help each other out by means of straightforward exchange: monetary transfers in return for household help or childcare. In all cases involving reportedly unpaid childcare provided by older parents to young couples, the older parents received money more frequently and in larger amounts than did their counterparts who did not provide such childcare. Similarly, elderly parents who performed housework for an adult child could expect to receive more monetary transfers from that child. From the other direction, although exchanges of parents' money for work done by children were fairly rare, the chances that children might be receiving money were considerably higher when the children were providing housework help for their parents.

The Gender Factor

Should elderly parents expect to receive more assistance from their sons than from their daughters? While the earnings of sons may be higher, educated daughters can be an excellent source of assistance to older parents. In the case of productive couples in middle age, the amount of financial assistance the husband gives to his parents increases by 6 percent, 13 percent, and 7 percent as his education rises from primary school level, through high school, and to college. The wife's assistance to her parents at these same levels of education increases by 3 percent, 8 percent, and 19 percent, showing an especially significant jump in parental support by women who attend college.

In addition, parents who make investments in a daughter's education have a high expectation of receiving assistance in return, because educated daughters are able to acquire resources not only through their own earnings but also through better marriages. The amount of money that a grown daughter gives to her parents rises with her husband's income. If the married daughter has a job, the amount she gives to her parents is also likely to be greater, either because it is financed by her income or because the job gives her greater bargaining power within the marriage. Daughters also seem to focus on their own parents' welfare—as a married daughter's earnings rise, transfers to her parents increase while transfers to her husband's parents remain the same.


Overall, the study found that transfers of resources between older and younger generations of a family cannot be predicted according to a simple model. Although altruism may be the basis for this kind of giving, families vary considerably in the way they arrange transfers of money and time. Significantly, families do not give at the same level: while some engage in substantial exchanges of assistance, others provide and receive little support. Other findings show that variations in motives can lead to different kinds of implicit contracts between family members, and that gender differences may also affect the way transfers are made. Insights of this type provide a better understanding of family behavior and may lead to clearer expectations of how American families might respond to changes in public policies toward the elderly.


  • [1] Lee A. Lillard and Robert J. Willis, "Motives for Intergenerational Transfers—Evidence from Malaysia," Demography, 34(1):115–134, 1997.

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