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Being thrust into the role raises many tough issues for grandparents. First and foremost, how will they afford retirement while handling the added expense that comes with raising a family? Providing food, shelter and clothing for kids is expensive, and the average income for grandparent-headed households is usually under $20,000.
Financial expert Chris Farrell, host of Twin Cities Public Television’s “Right on the Money!” urges grandparents to think of themselves first. "You can't help your grandkids unless you've taken care of yourself," he says. "While your inclination is to put the child’s needs ahead of your own, you actually are serving them better by looking out for yourself first." With that in mind, Farrell offers five practical suggestions for grandparents who face this situation.
Don’t Sacrifice Your Retirement
“When money is tight, many grandparents wonder how they’ll live in retirement and pay for their grandchild’s expenses,” says Farrell. “Funding a secure retirement should be seniors’ first priority.” Farrell cautions seniors against borrowing money from their 401(k) plans. While it might be tempting to dip into money previously earmarked for retirement, it’s not a good idea – and could be trouble in the long run. Grandparents should not stop saving for retirement under any circumstances, especially if they’re relatively young in age.
Still others imagine they should forsake funding their retirement, and be putting money into a college fund for their grandchildren. But this isn’t the best use of their money either. “The child can borrow to go to college,” says Farrell. “The grandchild will have more time to pay back the student loan as opposed to a grandparent who faces a more limited time frame.
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