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.
“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 the principal. You can often get out of debt faster, even though the program typically lowers your payments by 30-50%.
“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 sight.”
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.”
“The department store credit cards were the worst.,I’d make a $100 payment and $75 would go toward 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 that 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:
- Make sure to set up a household budget that fits your income, especially if you rely on fixed income, like Social Security benefits.
- Your budget should include setting money aside in savings for gifts for your grandkids.
- Keeping a gift fund will allow you to purchase presents with cash instead of credit throughout the year.
- 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.
- 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.
Money-Saving Tips for New Parents
Money ManagementChildren may be priceless, but they are also expensive. According to the U.S. Department of Agriculture, raising one child to the age of 18 will set parents back nearly a quarter-million dollars! This guide is designed to save parents time and money. It also helps you find smart ways to reduce costs and use free resources to avoid debt.
Open Booklet Download BookletWe 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.
If grandchildren have led to grand debt for you, talk to a certified credit counselor to find the relief you need today.
More resources for retirees
Retirement Planning
Financial PlanningStudies show that most Americans are behind when it comes to saving for retirement. This booklet explains how to use retirement tools to your advantage to set an effective saving strategy. Learn how much you should be saving, how to plan for your golden years, and what you can expect as you transition into retirement.
Open Booklet Download BookletRetirement Planning Secrets
Recent news may make it seem like retirement is simply out of reach, but we’re sharing the secrets to establishing a solid financial plan that helps you realize your retirement goals. Learn how to make a retirement plan that will allow you to live out your golden years the way you want, even if you’re facing challenges like limited income and too much credit card debt.
Do you want to know a secret?
Have you heard those rumors that retirement is almost impossible to achieve? We have a few secrets to share straight from the lips of those who know, because they’re retiring now.
Retirement will come sooner than you think – 65 is the traditional age to retire but many people plan to work past age 65. But the truth is 61 is the average current age of retirement, so it’s closer than you might expect…
… Unless it doesn’t come at all, as many retirees are still working at least part-time. So just because you’re officially retired from a full-time career, you may still be doing some type of work.
Retirement may last longer than you expect. Most people spend about 20 years in retirement, but medical advances mean life expectancies are getting longer.
Seventy five percent of your income isn’t enough. That used to be common wisdom, but if you don’t earn a lot of money then you could need as much as ninety percent of what you earn annually in retirement.
Have you heard Florida isn’t the retirement mecca? Based on everything from healthcare quality and cost of living to taxes and crime, Wyoming is now the best place to live if you’re retired.
Almost three out of four retired Boomers don’t work at all, but those who are working aren’t always doing it for a paycheck. Some want to stay active, keep their minds sharp and have a purpose. Oh, and of those who aren’t working, half sight health reasons as to why they don’t. And speaking of that…
Healthcare should be your biggest concern. The average reoccurring cost for Medicare beneficiaries is almost $2,000 per year and at age 85 or older nursing home costs average more than $24,000; some pay over $66,000. Medicare premiums and deductibles are about $3,000 a year. Nursing homes cost between $24,000 to $60,000 per year. And in fact, a retired couple may need up to $220,000 for healthcare costs over the course of retirement.
And finally, perhaps the biggest secret of all – federal retirement benefits are still relevant. Although people use pensions, IRAs, 401k’s and investments, Social Security is STILL a top income source for retirees. In fact, the average retired worker receives over $1,200 every month!
If you’re behind on retirement savings it may be because of debt. Call us and we’ll see if we can help.
