Ask the Adviser: Should I begin making gifts to my new grandchild? - Rodgers & Associates

Ask the Adviser: Should I begin making gifts to my new grandchild?

If you’re over the moon about recently welcoming your first grand­child and feeling compelled to make bold financial gestures, you’re not alone. In fact, you might be experi­encing a common condition known as “New Grand­parent Syndrome.”

Side effects may include:

  1. The desire to immedi­ately fund college savings accounts on the grandchild’s behalf.
  2. The impulse to purchase a second home to be closer to the grandchild.
  3. Aggres­sively purchasing baby clothes and stuffed animals.

All joking aside, we see this all the time with our clients, and sharing updates about grandkids (and photos!) is a favorite discussion point in meetings with them. As our clients experience family transi­tions of all kinds, our goal is to help them make smart giving and investment choices that are more future-oriented than emotion-led.

My suggestion is this: before you commit to any massive changes, wait a year and see if you still feel the same way. I’d also remind you that while the first grand­child is obviously very special, you may have more on the way. Before you create a precedent, you should perhaps consider what the impact on your finances might be if you have several more grand­children that you’d feel compelled to treat the same way.

Putting $10,000 into a college savings account might seem like a great thing to do now, but what will the impact be if you end up having 10 grand­children? Does your retirement plan still have a suffi­cient proba­bility of success if you have $100,000 less available for your own retirement needs?

Buying a second home near a grand­child might also be tempting. But what if your kids end up having to move? What happens when your other kids who live in a different part of the country have children? Will they expect you to buy a home there too?

Enjoy this moment to the fullest. Love and remember every minute of it. Take a million pictures. Be the best grand­parent you can be. However, be self-aware enough to recognize that this amazing feeling might play tricks on your judgement a little but know that this is normal. Just like on an airplane where you are told you need to put on your oxygen mask first before putting it on small children, despite what your instincts might tell you. You don’t want to jeopardize your own financial situation to help your grand­children, only to make it so your children need to support you finan­cially later in life. 

Related post — Ask the Adviser: How can I give to my grandkids in a way that supports my own retirement plans?