Grandparents, start your savings.
If you hope to become a grandparent one day, make sure you contribute a little more to your retirement fund because having grandchildren is an expense you may not have considered.
A recent study by The Senior List found that grandparents spend an average of $4,000 a year on their grandchildren.
Of the 1,200 grandparents surveyed, 10% admitted to giving $10,000 or more to their relatives.
The annual contribution covers the cost of gifts, clothing, shoes, entertainment, dining, vacations, college funds, extracurricular activities and major purchase support.
The results show that 96% of grandparents support their grandchildren in some capacity, even if it puts them at a financial disadvantage.
Supportive grandparents report that 1 in 5 feel pressured to contribute more than they can afford, with 10% taking on debt or delaying retirement to help a grandchild.
Despite overextending themselves, grandparents see the contribution as worthwhile, with 63% saying their grandchildren’s happiness is worth any financial sacrifice and 26% of people living more frugally so they can support their children’s offspring.
Grandparents see it as worthless to see their grandchildren prosper, even if it means delaying retirement, which half of them were willing to do, or 40% would come out of retirement to support their relatives.
Some elders have even taken on an additional role as parents; 16% of grandparents have at least one grandchild living with them.
However, due to the unstable economy and inflation, 32% of grandparents have reduced their financial contributions and 7% have increased their support to help with the rising cost of living.
Patty David, Vice President of Consumer Insights for AARP wasn’t surprised that grandparents had to cut back on their cash gifts.
“In 2018, when we ran our last study on grandparents, the average spend was about $2,600 a year,” she says. Six years later, the number has grown to $4,000, David told Parents.com.
Although grandparents want to be able to help their grandchildren, they need to consider how much they can contribute without reducing their personal finances.
Some options grandparents can consider are investing, opening college savings accounts, estate planning, or using the grandparent cycle, which allows grandparents to use a 529 plan to fund a grandchild’s education without affecting the student financial aid eligibility, USA Today describes.
Regardless of the dollar amount that grandma and grandpa can give their grandparents, they value the relationship and time with each other above expenses.
“There are many ways they can do this without spending huge amounts of money. The roles of the modern grandfather consist of being a source of wisdom, carrier of family heritage, friend, storyteller, teacher, mentor and caregiver,” concluded David.
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