Grandparenting: Counting the Cost

By Jordan Rubin, CFA, CFP®

Senior Financial Advisor

April 10, 2023

Let’s face it: you’d be hard pressed to find a grandparent anywhere who won’t admit to the pleasure of spoiling the grandkids. Whether it’s unlimited trips to the ice cream shop or no-budget toy shopping, Grandma and Grandpa love saying “yes” to just about every request that comes from their grandbabies’ mouths.

But it’s also a reality that grandparenting can come with a hefty price tag, as demonstrated by a 2017 survey from TD Ameritrade. The online investment company polled over a thousand millennial parents and a similar number of grandparents with millennial children, asking about levels of financial support provided by grandparents for grandchildren. The grandparents reported that they spent an average of $2,383 annually for the direct benefit of grandchildren:


  • 19% contribute to college savings
  • 55% contribute to clothing
  • 58% contribute to toys
  • 39% contribute to non-cash gifts
  • 42% contribute to cash gifts
  • 27% contribute to school expenses
  • 16% contribute to vacations
  • 38% contribute to meals out/entertainment
  • 14% contribute to extracurricular activities
  • 10% contribute to allowance/payment for chores


And that’s not all. More than half of millennial parents say they depend on grandparents to provide at least an hour of childcare per week, which, they say, translates to around $300 in savings on babysitting costs weekly. (Not that the grandparents seem to mind; 40% of them said they gladly keep their grandchildren without being asked.)

Education costs, as noted by the top item on the list above, is an area where grandparents often get directly involved. Especially with the ballooning amount of student load debt carried by millennial parents themselves, saving for their kids’ college becomes a bigger challenge every year, and many parents indicate that the help of grandparents is essential.

All this only makes it more vital for those approaching retirement—and grandparenthood—to take careful stock of their financial plans and retirement spending assumptions. Overwhelmingly, grandparents want to help provide for future generations, including their grandchildren. But without careful planning, well-intentioned grandparents run the risk of drastically underfunding their own retirement lifestyles in their efforts to provide support for their grandchildren. It’s important to keep in mind that you aren’t doing future generations any favors by placing them in the position of having to support you financially at the same time they’re trying to get their kids through college or launched into a career.

Many grandparents utilize their state’s 529 plan, making gifts into a qualified account that grows tax-free until the child is ready for college. Funds from the plan can then be withdrawn tax-free to cover qualified expenses such as tuition, books, lodging, and other necessary outlays for higher education. Others choose to gift Roth IRAs to their grandchildren, since these accounts can also be tapped tax-free for qualified educational expenses.

However grandparents decide to do it, it’s important to incorporate grandchildren’s anticipated future needs into the overall financial plan, if providing that type of help is a central priority for the grandparent. At Modera Wealth Management, we help grandparents and parents make sound plans that incorporate those priorities, charting a path for both long-term financial security and the satisfaction of contributing to the success of future generations.

To learn more about gifting strategies for family members, click here.

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