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Love Your Grandkids -- but Take Care of Your Own Finances First

AJDMMD Graduate and grandparents outside, portrait. Image shot 2006. Exact date unknown.  Outdoors; Portrait; Graduate; Graduati
If you're a grandparent, there are two key gifts you may want to share with your grandkids: time and money. On a day-to-day basis, you may have more of both than you did when you were raising your own children.

Still, as wonderful blessings as your grandkids may be, and as much as you may want to shower them with gifts, being too generous can jeopardize your own financial future. One of the best gifts you can give your grandkids is to assure your own needs are met, so that you don't become a burden on them or their parents as you get further into retirement.

The Gift of Education

Helping cover the costs of college is a popular choice for grandparents, according to Legg Mason, which recently released the results of an online survey it took of more than 1,000 grandparents last November.

About two-thirds of those surveyed with grandchildren under college age were either actively saving for their grandkids' college or planning to do so. Yes, college is expensive, and too much college debt can be a burden for a lifetime. And it's a very generous offer to help out with the grandkids' costs -- but only if you can afford to do so.

Unfortunately, it wasn't entirely clear that most survey participants could really afford the level of generosity they were looking to exercise with their grandchildren.

Is This a Bad Idea?

To take part in the survey, the grandparents had to be aged 50 to 80 and have a household income of at least $50,000. So these are people whose incomes are right around average, or a bit better, and are either retired or have more of their careers behind them than in front of them.

Despite being on fairly solid financial footing, nearly 60 percent of survey respondents rated worries about outliving their savings as their top planning concern, and 55 percent rated funding their own retirement as a top concern, competing with their desire to save for their grandkids' educations.

If making ends meet is still a key concern of the folks Legg Mason surveyed, and they're not finished saving for their own retirements, they're more or less out of time. And if they're forced to lean on their kids for financial help later because they can't cover the costs of their most senior years, are they really helping them?

So, as much as you may want to pitch in for education costs and as noble as those intentions might be, you must make sure your own retirement is on track to be funded before saving for your grandchildren's college educations. The consequences to you (and those who ultimately wind up supporting you) could be ugly.

What Else Can You Do?

If you have can cover a comfortable retirement for yourself, feel free to put any extra money toward your grandchildren's college educations, if that's a priority for you. If you can't, there are ways to pay for a solid education without the crushing debt.

One option is to create an educational trust as part of your estate plan. That way you can keep your assets available to you to cover your own retirement costs, while still making sure you do what you can to help your grandchildren with their educations. This helps you not only keep education as a priority for your family, but also reduces the chances that you become a financial burden on them.

In addition, you can tie your college savings plan for your grandchildren to your own financial milestones. For instance, if you plan to downsize your house to cut living expenses, that may both free up a large chunk of cash and reduce your monthly costs of living. If that move puts your retirement nest egg over the top, then it frees up money you can save for their educations.

Alternatively, you can use something similar to the snowball process that helps people get out of debt to enable you to help your grandchildren with their educations. If you're actively funding your own retirement, promise yourself that once your retirement is covered, you'll take the same cash flow you had been putting toward retirement and instead put it toward their educations.

And finally, remember that it is possible to borrow money to pay for education. If you can't help them before they're in college, you can always give them money after graduation or in your will to help them pay down their loans.

It's Not Selfish -- It's Smart

Education is an important goal, and one that is certainly worthy of your consideration to help fund for your grandchildren. Still, remember to take care of yourself first. The gift you give them by not winding up a financial burden on them in the later years of your retirement is probably worth at least as much -- if not more -- than what you could chip in for their schooling.

Motley Fool contributor Chuck Saletta has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.

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Hi Sajwife,

Im with you. What has happened to the west, if grandparents being concerned about helping pay for their grand kids education or ANYTHING is even a major issue. Where did this start? From unwed kids having children and the grandparents stepping in to help from square one so both parties got used to the fact(?) the grandparents would always be there with an open wallet. In my culture that happens so rare it belongs in a museum. Maybe the government spoiled everyone in to thinking "everyone" is entitled to all the education they want as long as they go to school. They are not! But then suddenly we came out with food stamps to help the hungry. Ok, great. Then we came out with college aide. Great. And then heres where it falls apart...we came out with the notion that some people should get "theirs" simply because their ancestors suffered. Well who are their grandparents? Their ancestors! That makes no sense. Take from your ancestors who never had the chance to go to college and had to save all their life to be able to take a vacation once a year and now you have the nerve to even ask them to help out when they have been doing it all your life! Im sorry to say but, I finished high school, saw my parents could never send me to college without going into debt and so I joined the service and let them pay for my education. Thats the way it should go for those who cant pay their own way. Do none of us realize that in almost every African country parents are killing themselves working just so their kids can go to public school! Education thru high school in America is coming to us, yes. But sorry...everyone doesnt get to go to college. Thats why Bill Gates and Steve Jobs invented apple and microsoft because they didnt want to burden their parents(among many reasons) And another thing we have to start getting away from is that college is the only way to make it. It makes me sick that I see grand parents today who have never been outside their state let alone the country because they gave every dime they made to their kids...and now it continues to the grand kids. Wont ever happen in my family! My kids will work 2 jobs to make sure their grandparents can sit on the porch and enjoy life and travel a bit as a way to say thank you. When does it become the give back generation, not the gimmee generation?

March 26 2014 at 12:11 AM Report abuse rate up rate down Reply

Last week the big financial geniuses advice was to NOT give your children an allowance, but to give that extra money to the geniuses to 'save' for us.
Now this week their big advice is to NOT give any money to your grandchildren, but to also let the financial con-artists have that money to 'save' for us.
The scamming financial types can't get enough of everyone else's money, so they can make it THEIRS.

March 25 2014 at 10:37 PM Report abuse rate up rate down Reply

I did not expect to be sent to college by my grandparents. They had dozens of grandchildren and what did they owe me, except love and support? We worked hard, and sacrificed to be where we are today. We come first.

March 25 2014 at 10:25 PM Report abuse rate up rate down Reply

The best thing you can do for your grandchildren is to teach them the value of a dollar and not expect everything to be handed to them! We worked for everything we have with no handouts and this generation should do the same.

March 25 2014 at 7:59 PM Report abuse rate up rate down Reply

we will not be buying plastic sh-- for grandkids. stocks, metals and time with us.

March 25 2014 at 6:54 PM Report abuse rate up rate down Reply


March 25 2014 at 6:24 PM Report abuse rate up rate down Reply

The 800 pound gorilla in the room is the transfer of wealth from the younger generation to the old by Social Security and Medicare, which, if the GOP has its way, these young workers will never see.

March 25 2014 at 5:05 PM Report abuse -3 rate up rate down Reply

If you planned to help your grandchildren that's great--the word is PLANNED. My grandkids do not expect anything but they are most thankful that we can help them with their education so they won't have years of debt accumulated before they even find a job. If you are a senior and went through life on your own, then it is understandable that you don't feel obligated to save for your grandkids college funds. But when your own children are well settled into their careers, and you have children that have passed and left you grandkids, it makes you think the kids might need some help. I am proud of what we can do for the grandkids and I am proud of them.

March 25 2014 at 4:33 PM Report abuse +2 rate up rate down Reply

The grandparents are holding too much money. Keep the amount you need to not be a burden on anyone, and give the rest to your children, the parents of your grandchildren. The geriatric set is holding too much money, money that could be used by your off-spring to build a comfortable future. They have a longer horizen for investment and with common sense investing can grow the wealth you have accumulated.

March 25 2014 at 4:23 PM Report abuse -3 rate up rate down Reply
1 reply to patdartx's comment

Pat, you are very much in need of counseling. Why call them the geriatric set? Older folks know how to enjoy money better than any age group in America because they finally let go of all their goals, responsibiklities and now can live each day as it comes and you want them to give their money away? They earned it. F. U. Earn yours like everyone else does and if by Gods grace your grandparenst have so much they can offer to help you too, fine. If not get ioff your *ss and get a second job and learn how to buy the right they did.(or should have). Even the richest man in america, Bill Gates is leaving his kids 25m. The rest goes where it should the starving people who would never have a chance to go to schoool to even learn to support themselves. Tell us, please.....why do you feel people over 65 are worth less than you? Have you ever noticed that most of the CEO 's of the biggest corps are all over age 60. Many even 80 or more. Today 55 is the time of life to start your second career, or to start living, not planning for death. Thats the 1960's my man, step into the 21st century. Let me end with something we all (who are sane) can agree on: YOU CAN BE YOUNG WITH OUT MONEY, BUT NOT OLD. Start saving now Pat, and leave your grandparents alone. Let them enjoy and spend every last dime. They earned didnt. Am I wrong? And one more thing...we are entering an age where everyone of any age is not going to make it financially. Our govt is letting too many jobs go overseas and disappear forever. Thats too bad. God never promised us a good living. You take what life gives you and if you are lucky or smart(you have to be one) then youll prosper, if not, youll struggle and make excuses and blame others like the other 25% of America who cant rub 2 quarters together because no one showed them a thing about investing money, but they sure know how to spend it. One is useless without the other. And by the way....shhhhhhh...big secret, really....nobody said you cant be poor and happy as a clam. We are responsible for our own happiness, not grandma and grandpa. Maybe because I am an Anthony Robbins coach I learned it, but life is much sweeter when you can learn to make yurself happy inside, with your own thoughts, than when you need another person like a wife or sex partner or education to do it for yu. Hey...I love educated people. But look at Anthony Robbins, Bill Gates and Steve Jobs....3 of the most wonderful people to be looked up to in the country and all with no college degree. College is just a bonus, not a prerequisite to be happy. I teach many college grads every day how to throw their hated job in the trash and go enjoy their life on 1/2 the salary while loving what they do. Love what you do and you'll never have to work another day in your life again. And this can be done with or without college.

March 26 2014 at 12:27 AM Report abuse rate up rate down Reply

w/ all due respects to Chuck Saletta and those adding thoughtful comments; UNFORTUNATELLY most of the economical problemes for urban americans start w/ private schools astronomical fees, without which it has become very uphill for urban -stress in urban , may be not the real America, but certainly a sizeable part of it- for kids to get the ASTs , etc, etc...BEFORE the College bills !!!

March 25 2014 at 3:59 PM Report abuse +1 rate up rate down Reply
2 replies to Louis's comment

Your grandparents obviously didn't help with YOUR education. Then again, nothing could.

March 25 2014 at 5:03 PM Report abuse rate up rate down Reply

Louis, sadly there are 2 problems. Im with you. #1-The govy should never have ever let college fees get out of hand and there were several ways they could have prevented it, and saved us taxpayers billions in the process. #2-We created a society that thinks they are entitled to free everything, just because it "used" to be like that for a short time in history somewhere else before. No one is entitled to anything first of all. In Africa the govt wont even send your toddler to first grade if you dont pay difrectly or with rediculous fees! Secondly...happiness cannot be bought with college degrees for many reasons. First is that too many people today only go to college to earn more money. I look at the average nurse in a hospital in any major city today and I want to puke when I see how obvious it is why she chose that profession. MONEY....not love of people! This must change. I say lets make some peoples college degrees invalid if they have no social skills to treat other people with dignity when in positions dealing with people. Nurses, police detectives, Wardens of prisons, Lawyers and the list goes on. IF WE MADE HUMANITY THE FINAL THING TO PROVE YOU HAVE TO GET YOUR DEGREE, we would have at least 1/3 less people in college in the first place as they would realize they dont belong there. Everyone doesnt belong in college. Can i say it again....EVERYONE DOES NOT BELONG IN COLLEGE!

March 26 2014 at 12:37 AM Report abuse rate up rate down Reply