Sandra Has Some Sage Financial Advice for New Grandparents

Profile of Sandra

Spoiling your grandchildren can lead to grand debt as they get older.

Spoiling your grandkids is a grandparent’s job. It’s also one of those great joys in life. But as your grandchildren age, their tastes inevitably get more expensive. Giving them the world can easily get you into serious debt problems.

That’s what happened to Sandra. When her two grandsons and granddaughter were young, she could buy them cheap toys to get lavished with hugs and kisses. But as they became teenagers, it took more and more expensive gifts to get the same reaction. Sandra admits this was at the center of why she got into debt.

Sandra started to rely on credit, even though she knew better…

“I just got myself into more debt than I could handle. I’m usually smarter than this, but I couldn’t help myself when it came to giving them what they wanted. I couldn’t go out and buy the little things I bought before, because now they’re too big and want bigger things.”

Sandra couldn’t afford to buy them gifts on her fixed income in retirement. So she turned to credit cards.

<GRAPHIC QUOTE> I took advantage of every pre-approved credit card offer. The next thing I know, I didn’t have enough room in my wallet to fit all the credit cards.

 “Before I knew it, my debt was way up there. I don’t even remember exactly what I bought. Really, I don’t even want to go back to those days. What I do remember is that I was constantly robbing Peter to pay Paul. And then one day, all my accounts ended up falling behind.”

Sandra knew she needed help…

“I called several companies to see if they could help more. One company wanted almost $200 more than what I was already paying per month. But I already couldn’t afford my payments as it was. Then I called Consolidated Credit.”

Sandra’s credit counselor explained how a debt management program can help a borrower get out of debt with no extra money. The program works by lowering the interest rates applied to your debts, so more of each payment goes to paying principal. You can often get out of debt faster, even though the program typically lowers your payments by 30-50%.

<GRAPHIC QUOTE> After finding out that it would be cheaper to go with Consolidated Credit, I felt great because it was saving me quite a bit of money

“When they told me what my monthly payments would be, I set it up right then. Money was still tight. But as I got some accounts paid off, I added a couple more dollars to the monthly payments. I’ll make my last payment in November and I’m feeling really good. It will still be a little tight until then, but the end is in site.”

Sandra now understands the risks of credit cards, especially on a fixed income…

Credit cards are revolving debts. That means the more you charge, the more you’re required to pay each month. That can be particularly problematic for grandparents living on a fixed income in retirement.

The other challenge is that once your balances are high, most of each payment you make goes to cover accrued monthly interest charges. Sandra realized how much of a trap that was for her budget.

“Unfortunately, before Consolidated Credit, what I paid every month was worth was just worth the interest. Some of my interest rates were as high as 33 percent.”

<GRAPHIC QUOTE> The department store credit cards were the worst. I’d make a $100 payment and $75 would go towards the interest.

“Then on a debt management program, some of my rates went down to 10 percent.”

Sandra learned her lesson when it comes to credit…

“I use my debit card more often now. And if I don’t have the money, I just don’t get it.”

She also asked that we pass this piece of advice on to other grandparents: “Don’t accept every pre-approved credit card offer than comes through!”

Financial Advice for New Grandparents

Sandra’s situation is not unique. Transitioning to a fixed income after retirement is a challenge, and grandchildren tend to make it even tougher to budget. But most grandparents can’t afford high monthly payment requirements when they overcharge. So, we encourage you to follow this advice:

  1. Make sure to set up a household budget that fits your income, especially if you rely on fixed income, like Social Security benefits.
  2. Your budget should include setting money aside in savings for gifts for your grandkids.
  3. Keeping a gift fund will allow you to purchase presents with cash instead of credit throughout the year.
  4. As your grandchildren get older, work with their parents to teach them important money lessons, including why it’s important to set limits on gifts.
  5. Helping to teach them the value of a dollar will help you avoid overspending and give them knowledge they’ll need later in their own lives.

We encourage you to download our guide Money-Saving Tips for New Parents. You can use the advice and help your children avoid debt from their growing family, too.

We also agree with Sandra’s advice. Avoid credit cards whenever possible! Revolving payment requirements and high interest rates are never easy, but they’re even worse when you’re retired.

Store credit cards tend to have especially high interest rates and often have unfavorable payment terms. Don’t let yourself get pulled in by reward programs that are usually too good to be true. Interest charges almost always offset the rewards you earn.

More resources for retirees