As more of America's children are raised by relatives other than their parents, state and local governments need to do better in helping these families cope with an array of financial and emotional challenges, a new report concludes.

Compared to the average parent, these extended-family caregivers are more likely to be poor, elderly, less educated and unemployed, according to the report, "Stepping Up For Kids," released Wednesday by the Baltimore-based Annie E. Casey Foundation.

Despite these hurdles, child-welfare experts say children who can't be raised by their parents fare better in kinship care than in the regular foster care system.

"We urge state policymakers to make crucial benefits and resources available to kinship families so that their children can thrive," said the Casey Foundation's president, Patrick McCarthy.

According to 2010 census data, about 5.8 million children, or nearly 8 percent of all U.S. children, live with grandparents identified as the head of household. However, many of those children have one or both of their parents in the household, as well as grandparents.

The Casey report focuses on the estimated 2.7 million children being raised in the absence of their parents by grandparents, other relatives or close family friends. The report says this category of children - whose parents might be dead, incarcerated, implicated in child abuse or struggling with addiction - increased 18 percent between 2000 and 2010.

The majority of such living arrangements are established informally, but as of 2010 there also were 104,000 children formally placed in kinship care as part of the state foster care system.

These children accounted for 26 percent of all children removed from their homes by child welfare agencies and placed in state custody, but practices vary widely.

Through the Fostering Connections Act of 2008 and other programs, federal funds are available to assist children who leave foster care to live under the legal guardianship of relatives. However, states vary in how generously they allocate such funds, and the Casey report said more outreach is needed to ensure that kinship-care families know their options.