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Are Grandparents Being Too Generous?

Financial pros worry that grandparents endanger their own retirement by giving their grandkids too much money

By Richard Eisenberg

Comedian and author Sam Levenson said, "The reason grandchildren and grandparents get along so well is that they have a common enemy." Certainly there's a lot of affection between them. But today's grandparents may be expressing their love in a less-than-ideal way — by being overly generous to their grandkids.

 

The grandparents’ financial largesse just might be putting their retirement at risk.

 

 

 

And in a new AARP survey, 36 percent of grandparents 50 or older said that spoiling their grandchildren was part of a grandparent’s role.

 

 

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Reuters financial columnist Linda Stern says you might help your teenage or young adult grandchild save for his or her own retirement with a check to be invested in a Roth IRA. You can give each grandchild up to $5,000 a year for a Roth IRA, if he or she has earned that much.

 

Instead of doling out money to your grandkids, you might give them life lessons. For example: Don’t write a check to reduce your grandchild’s debt load. That may just encourage him or her to keep charging like mad, knowing you’ll be there as a backstop. Rather, talk with your grandkids about how to develop smart budgeting and spending habits that will stave off trouble in the future.

 

By teaching your grandkids how to avoid missteps with their money and their careers, you might just give them the most valuable gift of all.

 

Few grandparents do so, however. “We’ve found it’s easier for grandparents to give money than to give advice,” Timmerman said.

Photograph of Richard Eisenberg
Richard Eisenberg is the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of How to Avoid a Mid-Life Financial Crisis and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Read More
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