A grandparent is a very special role. As one author quotes, “Grandparents are a delightful blend of laughter, caring deeds, wonderful stories and love.” If you’re like many families, the grandparents are especially known to spoil the grandkids, which can go way past just a cookie after bedtime. In fact, a recent AARP study paints an interesting picture of how grandparents may be overextending themselves financially for those precious grandbabies. Here’s what the data says:
Since 2001, the number of grandparents has grown by 24% -- from 56 million to 70 million. That’s a lot of grandparents who can live up to the need-to-spoil stereotype. The average age of a grandparent is reported at 50, with the youngest grandparent reporting in at just 38 years young. No matter where you, your parents or your grandparents fall on this age spectrum, it’s important to think through what their financial goals are – both now and in the future, and if there is any room for grandbaby expenses. For the younger grandparents, it may be their prime saving years for retirement (something that shouldn’t be delayed). Or if a bit older, there may be some catch-up contributions underway. In any case, a grandchild likely was not a factor when thinking through a financial plan for the future.
This is reinforced as most grandparents do not consider themselves a financial supporter (79%) of the grandchild, yet 94% find themselves providing some sort of financial support. This disconnect can quickly spiral out of control if not managed properly. Data shows grandparents spend an average of $2,562 per year on their grandchildren (which translates into a $179 billion industry per year).
13% of grandparents say they struggle with the financial expectations of being a grandparent. This is especially evident when education and college costs come into play, where 7% of grandparents have taken on debt to help grandchildren pay for college; of these, 1 in 4 of have co-signed private student loans and/or incurred credit card debt that has yet to be repaid. This doesn’t just hit the bank now, the grandparent is then on the hook for this repayment well into the future.
It can continue to escalate when grandparents take on the role of a caregiver, with 7.7 million grandparents reporting having their grandchildren living with them. The median income of these caregivers is $51,448. Instead of putting money in their retirement accounts, they may find themselves incurring expenses for their grandchild. Even daily tasks such as extra water use, paper towels or diapers can quickly take a toll on budget. On the other hand, for those who are already in retirement and living off a fixed income, it may quickly feel like their budget tightened over these extra expenses.
So how can the big role of grandparent get filled without breaking the bank? Put a lens on toward experiences over material goods. After all, 86% of grandparents claim they buy gifts for their grandkids, spending on average $805. Instead of buying gifts, consider one of these 5 free activities that will create lasting memories:
And more! You get the idea. Spending money isn’t a requirement for spoiling grandkids. You can have fun and create memories without spending any (or very little) money.
Of course this may seem easier said than done (they would just love that stuffed unicorn or mechanical dinosaur) but ask yourself how it will impact their future, if at all. At some point too many “things” get diluted and you lose focus on the important things in life – making memories together that last a lifetime.
As times are quickly changing and people are living longer, it’s important to periodically check in on yourself – and your family – to make sure you’re set up for success in the future. This includes grandparents ensuring their future is secure – from health to finances. Because the best gift you can give your grandkids is to be there for them.