Grandparents Raising Grandchildren

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Financial Advice for Grandparents Raising Grandchildren

For many people who have already raised their children, becoming a grandparent is a welcomed new era.  However, many grandparents who are approaching or are already in retirement are suddenly finding themselves reliving parenting and the associated financial challenges.  This time, however, they are responsible for raising their grandchildren. 

According to the 2000 Census, 6.3% of all children under 18 in the United States (4.5 million children) are growing up in households headed by grandparents.  About one-third of these children do not have either parent present in the home.  These grandparents are again faced with childrearing, as well as all of the accompanying financial obligations. 

Financial Issues Grandparents Face

Initially, grandparents in this situation may have court and custody fees to consider. Legal custody is essential to enroll the child in school, have access to school records or obtain medical care. If there is a struggle between the grandparent and the parent, court fees could reach tens of thousands of dollars. Grandparents also may find themselves financially responsible for the parent, who may suffer from mental illness or substance abuse and is unable to care for him or herself. 

In addition, clothing, food, daycare, healthcare and education costs for the grandchild may put an immediate strain on grandparents’ finances, especially if Grandma and Grandpa are retired and living on a fixed income.  With so many financial considerations, short and long-term planning are essential to ensure that grandparents can make the appropriate adjustments and keep their finances on track. 

Financial Tips for Grandparents Raising Grandchildren

Determine your financial goals for your grandchild.  What kind of lifestyle do you want him or her to have?  What can you afford?  Will you pay for college?  When old enough, will he or she work part-time to help provide financial support?  These are all hard but crucial questions you must ask yourself before developing your financial plan to care for your grandchild.

Find financial assistance.  Because it is often difficult to afford the costs associated with raising a grandchild, some states offer subsidies for grandparent caregivers.  Grants are available under the Temporary Assistance to Needy Families (TANF) program, which offers financial help to families with a low income.  To see if you are eligible, contact your local Social Security Administration Office.  If you are retired and do not qualify for government assistance, you may have to consider going back to work to cover the new expenses.

Obtain health insurance for the grandchild.  Be sure to research all of your insurance provider options, including private insurance, Medicaid or state Children’s Health Insurance Programs (CHIP). Contact your insurance carrier to see if your grandchild is covered as a dependent on your policy refer to your local Department of Social Services or Child and Family Services office for Medicaid/CHIP information, or contact your local or state Public Health Office for information about low-cost or free programs.

Take advantage of tax breaks.  The IRS offers some help with daycare bills and other childcare costs via tax breaks. The federal income-tax credit for daycare expenses permits you to deduct about 20% to 30% of childcare expenses (within limits), which translates to $500 to $1,500 per year, depending on your income. Some states also offer additional tax breaks for childcare costs, so check with your tax or financial advisor for details.

Find advice and support from grandparents in similar situations.  Numerous organizations offer assistance and information on health, insurance, legal, financial and educational issues relevant to grandparents raising grandchildren.  The American Association of Retired Persons (AARP) maintains a national database of support groups at

Review your life insurance policy.  Now that you are caring for a dependent again, you should make sure that your grandchild will be adequately cared for if you become disabled or pass away.  Review your current life insurance policy and confirm that it will accommodate your grandchild.

Examine and adjust your will.  Be sure that your will designates a guardian for your grandchild in the event that you and your spouse die. Your will also can be a vehicle for creating a trust to hold your grandchild’s inheritance. The trust allows you to specify what you want the money to be used for (such as college education costs) and at what age you want the principal distributed to your grandchild. That way, you can delay distributing money to your child until he or she is old enough to handle it responsibly.

Adjust or develop your financial plan.  It is usually unplanned that grandparents find themselves caring for their grandchildren, so adjustments should be made to your overall financial plan as soon as possible.  If you don’t have a plan in place, now is the time to meet with a qualified financial advisor who can guide you through the new financial issues you are about to face.


Hypothetical example provided for illustrative purposes only.  Does not take into account transactions fee’s or expenses.  Past performance does not guarantee future results.  This information is provided for informational purposes only.  The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor.  The views expressed may not be suitable for every situation.

American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.

This communication is published in the United States for residents of  North and South Carolina only; and this advisor is licensed only in  the states of North and South Carolina.” 
Roy P. Janse 
Financial Advisor 
American Express 
Financial Advisors, Inc. 
IDS Life Insurance Company 
1150 Haywood Road 
Greenville, SC 29615 
Phone: (800) 554-0805 x141 
Fax: (864) 234-7139