When you become a grandparent, it can be easy to go overboard showering the newest member of your family with gifts and other items, but to ensure your budget doesn't become constrained and your retirement funds aren't affected, it's likely best to establish a cap on your spending.
According to a recent AARP survey, 96% of grandparents said they regularly spend money on their grandchildren. Meanwhile, despite uncertain economic times, 55% of respondents said they have not changed how much they spend on their grandchildren in recent years.
Some grandparents fall into a financially dangerous habit of overspending on their grandchildren, and although their heart may be in the right place, this can lead to serious hardship later on down the road. Instead, grandparents should keep saving and working toward retirement.
Setup a spending plan It's only natural to show the newest youngster in your family how much you adore them with gifts, but setting up a strict spending plan and sticking to it could be beneficial. To do this, you should determine where all of your money goes every month, but be sure to exclude what you're currently spending on your grandchildren.
Give priority to saving and preparing for retirement. If what you want to spend on your grandchildren cuts in to these initiatives, you need to reassess your priorities.
Determine long-term goals If you have grandchildren well before you plan to leave the workforce, revising your long-term goals could also help set up a grandchild spending budget.
Long-term goals can include anything from paying off your mortgage and car auto loans to putting a certain amount of your paycheck into savings every month. Once again, these goals should be given priority over spending money on grandchildren.
It's not all about the money In this day and age, people often show their love for one another monetarily and with gifts. However, research shows spending valuable time on grandchildren can be much more beneficial than a large gift.
Grandparents are also encouraged to hold off spending too much money on their grandchildren until they grow older and they can really appreciate the gesture. In addition, this will give you an opportunity to spend on more worthwhile investments, such as education or an automobile.
Setting up a strict budget once you have grandchildren is a good idea, especially if you want to retire on time. Just remember if you set up a plan with little breathing room, this can lead to a considerable amount of stress, so it would be beneficial to find a healthy medium.