Recently, there’s been a lot of news about grandparents helping out their grandchildren – and, by extension, their children – financially. An AARP survey released earlier this year found that half of grandparents are helping out with education expenses, 37% are assisting with everyday living costs, and 23% pitch in when it comes to medical or dental care.
This is, no doubt, an extension of the economy, at least in part. When we’re in financial trouble, we turn to family first. And when our family members are in financial trouble, we reach in our wallets and help them any way we can. Even in good times, you want to help your grandchildren go to college, or buy their first home, or walk down the aisle. But it’s a new bit of research out of the UK that has me worried, with this disturbing news: Over 1.7 million grandparents and parents are being pushed into debt by so-called “greyday” loans – financial assistance provided to their adult children and grandchildren.
I get – and, quite honestly, applaud – the fact that you want to help out. But your own needs, like your retirement, your medical expenses, and the roof over your head, have to come first. Here, how to strike a
- Set limits. “Sometimes grandparents give until it hurts,” says Lynnette Khalfani-Cox, founder of TheMoneyCoach.net. “They go overboard, sometimes out of guilt, or they’ve been emotionally manipulated, or they’ve gotten bad advice.” A piece of candy here and a new pair of shoes there likely won’t break the bank, but if we’re talking about sizable gifts, toward college or other major goals, you need to plan it out and perhaps consult a financial planner to see how that cash might affect your other goals.
- Think long term. Maybe you can afford it now, but what does the future hold? Don’t just think about how opening your wallet will impact your month’s budget; consider how it might change your budget for the year. “Ask yourself, is giving this gift now going to create a financial hardship for me this year or in the future? If the answer is yes, that’s a gift you should think twice about,” says Khalfani-Cox.
- Consult the parents. If you want to make a contribution toward your grandchildren’s future – college or otherwise – it’s always best to ask their parents first. They may have a plan in place. Perhaps they have a 529 college savings plan they’ve already started, and you can add a contribution here and there.
- Leave the money out of it. If you don’t have the cash to give, consider another gift – of your time, your values, your advice.
Perhaps you can watch the children while a parent works part-time, if they’re young, or spend time with them passing the lessons you’ve learned over the years. Giving back, and leaving a legacy, doesn’t have to be about money.