Grandparents: The Givers Who Keep on Giving

(Nov. 28) -- It's that time of year again, when visions of presents dance in the heads of children -- while their grandparents puzzle over what to put under the tree. Of course, their generosity isn't limited to the holidays.

A new MetLife survey has found that almost two-thirds of U.S. grandparents provided some form of financial assistance to their grandchildren over the last five years. The average amount given was $8,661, generally in cash -- 40 percent for general support, 26 percent for education and 21 percent for major life events.

One of the big questions for any grandparent is how much to spend on the grandchildren through the years and how much to leave as a lump sum in a will. Among those surveyed, only 22 percent opted for the lump sum.

Once that decision is made, there are all sorts of other issues to face. How can you guard against a grandchild's spending your financial gifts foolishly or make sure your gifts won't erode his or her work ethic? Should the money be handed out equally to all your grandchildren, even if one set of parents is far wealthier than the other? At what point will your gifts to your grandchildren endanger your own financial security as you age?

I talked with a grandmother in Connecticut whose two daughters are both happily married, though one's husband earns many times more than the other's. The daughters have always been jealous of each other's relationship with their parents -- "I can't give one a Fig Newton and not the other," their mother said.

But unbeknownst to the wealthier daughter, the grandparents have been quietly providing thousands of dollars to pay nursery school costs for the other daughter's children. "For school, yes," the grandmother insisted, "but not for a weekend house, which they're talking about. That wouldn't be fair."

The will she and her husband have drawn up splits any money that's left after their death between the two families, though she doesn't expect there will be much. "My husband and I have to live, after all," she said. "Nobody left us much of anything, and we did just fine."

I asked Barry L. Kohler, a financial adviser in Portland, Maine, for some guidance in determining how much grandparents can safely give away.

"First you have to come up with a conservative estimate of how much you need in a given year to maintain your standard of living," he replied. "Then you have to add in inflation, which could be considerable. Next, you should try to figure out how many years you're likely to live. You don't want to run out of money before you run out of breath."

One approach is to check your statistical life expectancy. In years past, Kohler said, he would add five years to the expectancy figure to be conservative. Now, with so many people living longer, he suggests adding even more.

I encountered a grandfather in Woodbridge, N.J., who has two adult children -- a married son who has always been a responsible and independent person and an unmarried daughter who floats through life, only occasionally taking a job. The grandfather and his ex-wife basically support the daughter -- "She'd be on the street otherwise," the grandfather said -- but he also makes sure to help with his son's children.

"I set up a college savings plan. And if I hear about some kind of project like a summer camp, I'll say to my son, 'Let me pay for that,' " the grandfather explained. "I don't want to undercut him with his wife by coming on too strong, and I don't want him to become a dependent like his sister. It's a balancing act."

In thinking about their financial gifts, grandparents might consider creating memorable moments to share with their grandchildren. Take them to ballgames or the theater; bring them along on trips. Or put your cash into an investment account in his or her name and decide together what to invest in.

It's not, after all, just a matter of shifting dollars. The poet James Russell Lowell said it best: "The gift without the giver is bare."

SEE ALSO: Some Tips for Grandparents on Smart Giving