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

Alamy 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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