Planning Briefs

Grandparents Can Become Big Spenders For Their Offspring

Published Monday, March 20, 2017 at: 7:00 AM EDT

The cost of raising children is well known. Recent estimates put it at about $250,000 before a child even enters college. But it's not just parents who end up paying a hefty "price." It's grandparents, too.

According to a January 2017 article in the Miami Herald, grandparents spend an average of $2,383 a year just to benefit their children's children. They pay for toys, school supplies, college savings, and even extracurricular lessons.

This breakdown shows the percentage of grandparents who give money to grandkids for each purpose:

College savings: 19%
Clothing: 55%
Toys: 58%
Non-cash gifts: 39%
Cash gifts: 42%
School vacations: 27%
Family vacations: 16%
Meals out/entertainment: 38%
Extracurricular activities: 14%
Allowance/payment for chores: 10%

And it's not just money that grandparents give. More than half of millennial parents say their parents provide at least an hour of child care or household help each week. The average grandparent went all out, spending 48 hours a year on tasks including primary child care, babysitting, homework help, and transportation to after-school activities.

Some 40% of grandparents said they offered the help without being asked, and 43% said they did it because "it makes me happy." Just make sure you build this into your retirement budget.

This article was written by a professional financial journalist for Preferred NY Financial Group,LLC and is not intended as legal or investment advice.

An individual retirement account (IRA) allows individuals to direct pretax incom, up to specific annual limits, toward retirements that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Tranditional IRA. Contributions to the Tranditional IRA may be tax-deductible depending on the taxpayer's income, tax-filling status and other factors. Taxed must be paid upon withdrawal of any deducted contributions plus earnings and on the earnings from your non-deducted contributions. Prior to age 59%, distributions may be taken for certain reasons without incurring a 10 percent penalty on earnings. None of the information in this document should be considered tax or legal advice. Please consult with your legal or tax advisor for more information concerning your individual situation.

Contributions to a Roth IRA are not tax deductible and these is no mandatory distribution age. All earnings and principal are tax free if rules and regulations are followed. Eligibility for a Roth account depends on income. Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).