Grandparents: Four Tips for Spending on Your Grandchildren | Free

Many grandparents spend money on their grandchildren, whether it’s helping with big expenses like tuition and travel or covering smaller expenses like meals and holiday gifts. . The propensity to be generous is understandable, and many seniors say it brings them joy to support (or even sometimes spoil) their grandchildren. But showering them with gifts shouldn’t come at the expense of your financial security or that of your grandparents. If you’re looking to find the balance between providing for your grandkids and ensuring your own finances stay healthy, here are four tips to keep everything under control:

Know what you can afford. No matter how much you love to splurge on your grandkids, your financial security should remain your top priority. There are many unknowns in retirement, including your longevity, fluctuating markets, and the impact of inflation on purchasing power (a particularly pronounced factor right now, with inflation rates at an all-time high). for 40 years). Spend and donate within your means to maintain your own financial health in the future.

2. Determine if you are giving or lending. If you are giving a gift, understand the current federal tax rules, which are based on the calendar year. In 2022, you can give up to $16,000 to each family member before federal gift tax applies. If you are married, you and your spouse can donate $16,000 (for a total of $32,000). And make sure the recipient knows it’s a gift for their own tax purposes, so there’s no uncertainty about whether or not they should refund you. If you are lending money to a grandchild, be very specific about the terms and repayment, and consider having a written document that both parties sign and date. It can help protect your financial situation and make sure you’re both on the same page, now and in the future.

3. Talk about it. Many people tend to avoid discussions about money and finances with their family. If you want to help support your grandchildren or save for their future goals like college or a down payment on a house, be sure to let their parents know. It can help your adult children better manage their own financial planning. For example, if your grandchild’s parents know how much you expect to contribute to their child’s education, they may be able to reduce the amount allocated to a 529 plan and invest more toward other goals. , such as their own retirement.

4. Set boundaries. Even if you want to support your grandchildren financially, depending on their situation, it may not be appropriate to do so or provide them with support repeatedly. Everyone appreciates help, but if your grandchild needs to learn financial independence, it can be helpful to let them live on their own. Keep in mind the smart — and sometimes tough — financial lessons you’ve learned from navigating your own path as a young adult, and the pride that comes with successfully overcoming challenges.

If you want to provide financial support for a family member, but haven’t factored it into your overall financial plan, consider consulting a financial professional. He or she can help you assess your financial needs and goals and create a strategy. A clear and realistic understanding of your own financial situation can help you determine how much you can comfortably give and stay on track to achieve your own goals.

Tracy L. Edwards is a CERTIFIED FINANCIAL PLANNER Practitioner with Ameriprise Financial Services, LLC. in Emporia, KS. He specializes in fee-based financial planning and asset management strategies and has been practicing for 25 years. He can be reached at 702 Commercial Street, Suite 1B, 620.343.7937, or online at or by email at [email protected]

Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

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Ameriprise Financial Services, LLC. FINRA and SIPC member.

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