How Much Does It Cost to Be a Grandparent?
Nearly every grandparent helps their grandkids financially — to the tune of $3,917 annually.
The relationship between grandparents and their grandkids is incredibly special. A grandchild can bring unlimited joy and hope into our lives. At the same time, grandparents bring equal amounts of nurturing, wisdom, support and spoiling.
Do you know how much it costs to be a grandparent? For some, it can be quite a lot.
Giving to your grandkids can be an expense you overlook when retirement planning. Sometimes grandparents delay retirement or even take on debt to help grandchildren pay for expenses such as housing, meals, travel, college and more.
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If you're one of the many grandparents raising grandchildren in your home, costs can escalate even more.
Here’s a closer look at how much it costs to be a grandparent, per a survey by The Senior List, and the sacrifices grandparents can make for their families.
The cost to be a grandparent
In a recent study published by The Senior List, more than 1,200 older people were surveyed about the support they provide to their grandchildren. Topics included how much and what type of aid they provide, and how these contributions could change/have changed their own standard of living.
The study found that 96% of grandparents (about 60 million people in the U.S.) provide financial help to grandchildren, spending an average of $3,917 each year to support them.
The study reveals that many grandparents are compromising their own financial security to support their grandchildren, often by postponing retirement or depleting their savings.
Here’s how grandparents spend their money on their grandchildren:
- Gifts for special occasions: 80%
- Buying clothing or shoes: 62%
- Entertainment purchases: 58%
- Paying for meals out: 56%
- Paying for vacations (including travel to see them): 24%
- Contribution to savings or college funds: 22%
- Your grandchild(ren)’s day-to-day expenses : 15%
- Paying for tutoring or extracurricular activities: 12%
- Regular contributions: 8%
- Assisting with housing expenses: 7%
- Assisting with health care or medical expenses: 6%
- Tuition payments for school or college: 5%
- Supporting with large purchases (e.g., buying a car, helping with a down payment for a house): 4%
You’ll notice that a good chunk of money goes to such categories as gifts, clothes and other expenses, which makes sense when considering rising costs on everything from groceries to clothing and entertainment.
Unfortunately, it's easy to see how you could hurt yourself financially and undermine your retirement while trying to help your grandkids tackle elevated costs.
When helping grandchildren becomes harmful
What stands out as most alarming in The Senior List study is how deeply grandparents will sacrifice their own finances to support their grandkids — often at real risk to their financial and mental well-being.
The participants named each of these statements as true:
- My grandchild(ren)’s happiness is worth any financial sacrifice I make: 51%
- Providing for my grandchild(ren) is one of the most meaningful ways I show my love: 42%
- I feel an obligation to ensure my grandchild(ren) never go without, even if it strains my finances: 39%
- I prioritize my grandchild(ren)'s needs over my own financial stability: 30%
- I feel responsible to support my grandchild(ren) financially: 23%
- I've felt pressured to give financial support to my grandchild(ren), even when it meant stretching my own financial resources beyond comfort: 17%
What grandparents are willing to do to support their grandchildren.
The sacrifices grandparents have made or considered making to financially support their grandkids may include:
- Live a more frugal lifestyle: 18% have, 55% have considered it, and 27% would not.
- Pull money from a savings or retirement account: 11% have, 51% have considered it, and 38% would not.
- Retire later: 6% have, 42% have considered it, and 53% would not.
- Take on debt: 6% have, 28% have considered it, and 67% would not.
- Come out of retirement: 2% have, 37% have considered it, and 61% would not.
The implications of this are profound when we consider that, according to the Government Accountability Office, nearly half of Americans over age 55 have no retirement savings.
Pros and cons of spending money on your grandkids
Supporting your grandchildren financially or otherwise during retirement can be deeply rewarding, but it comes with trade-offs.
Grandparents must balance such retirement fears as outliving savings, managing health care costs and foregoing dreams of financial freedom and travel.
Pros
- Stronger family ties: Gifts, entertainment and outings can deepen bonds, fulfilling your dream of family togetherness.
- Lasting legacy: Education contributions secure grandkids’ futures, easing fears of not doing enough to support your family's needs.
- Grandkids’ opportunities: Covering clothes or health care boosts their potential and aligns with your generosity.
- Tax benefits: Gifts for education and 529 plans save on taxes, preserving savings for potential health care needs later.
- Personal joy: Spending on your grandkids counters fears of lost purpose and gives family-focused meaning.
Cons
- Impact on savings: Nearly $4,000 per year per grandchild can take a toll on your annual budget, risking dreams of travel and long-overdue freedom from working.
- Dependency risk: Regular support might create reliance, clashing with your goal of independence.
- Emotional stress: Pressure to give can undermine a relaxed retirement, heightening your financial fears.
- Less flexibility: Higher spending can limit retirement funds for surprises such as nursing home costs ($8,000-$12,000/month).
- Tax complications: Gifts above $19,000 trigger taxes, cutting into funds for living expenses or legacy plans.
It’s a balancing act between budgeting for your retirement and assisting your grandchildren. Selflessness can be a virtue, but don't threaten your financial stability — 57% of workers already feel behind in retirement savings.
However, you don’t have to choose one or the other; it’s possible to support your grandchildren while looking out for yourself, not to mention considering other ways to support your grandkids beyond handing out cash.
Investment gift options might be a better route. For example, if you’re saving for a grandchild’s education expenses, consider opening a 529 savings plan. Thanks to the “grandparent loophole,” grandparents can now use a 529 plan to fund a grandchild’s education without impacting their financial aid eligibility.
Not only can the funds in this plan be used to pay for tuition, but they can also cover room and board, fees and supplies. If your grandchild doesn’t go to college or spends less than anticipated, you can now roll over unused funds tax-free into a Roth IRA.
Weighing the costs
Most (if not all) grandparents would agree that they would do almost anything for their grandkids. Author Lois Wyse says it perfectly — "Grandchildren are the dots that connect the lines from generation to generation.”
While that's true, the costs of being a grandparent can overwhelm many grandparents, sometimes uprooting their retirement plans.
While you're all for spoiling the little ones, be sure to take care of yourself, so the time you spend together is worth every minute.
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