Grandparents: How to Avoid Back-to-School DebtAug 15, 2018
Parents are expected to spend around $800 for back-to-school shopping per household — that’s a lot of cash! But parents aren’t the only ones facing costs as the school year nears. Grandparents often play a big financial part in their grandchildren’s lives. With back-to-school costs so high, consumer debt could be a problem for both generations.
In this podcast episode, we talk about how parents and grandparents can manage back-to-school expenses and responsibilities.
Our Licensed Insolvency Trustees (LITs) take a look at the extent grandparents contribute to their grandchildren, and how it can affect other financial priorities. They discuss what things grandparents should consider before providing money to their kids for grandkids’ expenses, how they can help if they aren’t in a position to provide money, and how grandparents can help university-aged grandkids.
Let’s take a closer look at the topic of retirement. Before you open your wallet too wide this summer in hopes of reducing the debt your adult children will take on, consider this: how would your own financial future be impacted?
Is your retirement plan in order?
This question is critical. You have much less time to build and cushion your retirement fund than your kids do, even if it might seem like their needs (the costs of raising your grandkids) are more pressing.
Deferring your funds from your retirement plan to help your family can push your retirement by months or years. And while that might seem like a sacrifice you’re willing to make right now, the decision might not be entirely yours.
Changes to your health, the corporate or business structure you work in, or needs of a partner could mean an accelerated retirement — one you might not be financially ready for.
Check out the Financial Consumer Agency of Canada’s comprehensive guide to planning the ins and outs of your retirement.
RBC has a “Grandparents Guide” to spending on grandchildren that could be helpful as you ponder how or if you can contribute.
The truth is, once you reach retirement age, your options for bringing money in become much less. Many retirees find it hard or impossible to find extra work, even if they really need it to make ends meet. Retraining for upper level jobs takes time, and being hired into those positions has its own challenges. Health care costs and unpredictable living expenses can reduce retirement funds more quickly than expected and lead to debt.
Grandparents are notoriously generous. But this year, think about honing in on your own retirement goals before taking on back-to-school debt for your grandchildren. Make contributions to your grandkids’ education however it best fits into your financial plan.