How Much Should Grandparents Give?

If you enjoy helping your children and grandchildren financially, you’re not alone. Yet, for many, deciding how best to help can be a struggle. Here are some tips to consider:

• Give only what you can afford. Your own financial security should be your first priority. Since there is no way to know with any certainty how long you will live or how the market will perform, you need to make sure that you gift within your budget to avoid compromising your own financial health. Doing so will help ensure your generosity today doesn’t create a financial hardship for you—or for your family members—down the road.
• Set appropriate boundaries. Even if you want to help your children and grandchildren financially, it may not be appropriate to do so. Most young couples and/or parents take pride in their financial independence. The experience of letting adult children live within their own means can be an excellent teacher. Keep in mind the smart—and sometimes tough—financial lessons you learned as you made your own way in the world and the pride that came with successfully overcoming challenges.
• Clarify whether you’re making a loan or giving a gift. If you are loaning money, be sure to be specific about the terms and repayment and make sure you have a written document that both parties sign and date. This will help safeguard your financial situation if things go bad by providing you with legal recourse. If you are giving a gift, be sure the recipient knows it is such in order to alleviate any uncertainty about whether they need to pay you back.
• Give equally. To help prevent family battles and avoid damaging relationships, give equally to your children and grandchildren to the best of your ability. If you need to give more to one of your children to help him or her through a rough patch, make sure that your will is adjusted in order to even things out in the end and that you’ve communicated your intentions.
• Discuss your intentions. If you would like to help support your grandchildren or save for their future goals, such as college, talk with your children to let them know your plans. This can help your children do a better job with their own financial planning. For example, if they know how much you are saving toward a grandchild’s education, they may be able to save more of their dollars for retirement.

For help determining how much you can gift and/or ways to leave the legacy you desire, consult your financial professional. He or she can evaluate your financial situation and create a strategy to help you meet your goals.