How Much Do Your Grandkids Cost You?
November 09, 2016
Being a grandparent is pretty much the best thing ever. You get the endless love, get to see them grow up, help shape them into the person they will become all without the added stress of being the sole person responsible for their care. So in other words, when things get tough – you can send them home!
Your role as a grandparent relinquishes you of providing much of the financial support of raising a child, but many grandparents are spending a lot of money on their grandchildren. According to an AARP study, 25% of grandparents claim to spend over $1,000 per year on their grandkids. If you factor in that many grandparents are retirees, that is a lot of money for someone on a fixed income.
According to the study, the most popular reason for spending is for giving gifts – birthdays, holidays and those for no reason at all. 53% claim their spending also relates to educational expenses, while 37% say they help pay for their grandkids’ everyday expenses.
Let’s look at the facts. If you become a grandparent at age 52 and spend that $1,000 per year on your grandchild instead of saving it for your retirement, you could miss out on $21,600 in retirement income if you retire at 67 and generate an average return of 5%.
If you are already retired and on a fixed income of $2,000 per month, spending that $1,000 per year on your grandkids equals out to losing over 4% of your income, which you may not be able to afford.
Buying gifts and spending money on your grandkids is part of being a grandparent. We are not telling you to stop – just think before you spend. If you can’t afford it, don’t buy it. You may need to cut back.
If you would like help determining your budget and what you can actually afford to spend on your bundles of joy, please contact our office for a copy of our budget worksheet.