In China, older parents have become an important source of childcare for their grown children since 2010. However, caring for grandchildren may affect older parents’ psychological health (PH) in both positive and negative ways. Using the method of stepwise decreasing logistic regression, this study aimed to assess the factors associated with PH and support from grown children among caregiving older parents (400 respondents) based on the public panel data of the China Health and Retirement Longitudinal Study (CHARLS). The findings showed that being male (X1, OR = 1.661 (95% CI 1.066–2.590)), being literate (X4, OR = 2.129 (95% CI 1.369–3.309)), and expecting long-term care in the future from their grown children (X6, OR = 2.695 (95% CI 1.736–4.185)) were significant factors associated with PH. Therefore, in such an aging society, we should not regard older parents as a “burden”; we should recognize and appreciate their contribution to caregiving. As family and children, it is important to give older parents the necessary economic and emotional support to maintain their psychological health in the meantime.