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Friday, December 26, 2008

Advice: Grandparents "Invoiced" for Their Grand Children's College Education


After spending a festive and joyous Christmas Day with our daughter Emily, son-in-law Joshua, and our adorable grandchildren (a boy and a girl), my daughter handed me an envelope.

"We're giving these out to all the grandparents," Emily said.

Emily explained that the great grandparents would be receiving these as well, all of whom are retired and on fixed incomes. "This will lessen the pain for all of us," my daughter said.

Inside was a $10,000 invoice for each child, to be paid in monthly increments to college funds set up by my daughter. The first installment would be due by January 1, in less than a week!

While we fully intend to help out with our grand children's education, this amount was a shock to my husband and me. While we are financially comfortable, we are by no means rich, and we are currently saving extra for retirement, at least 10 years away.

As if Emily had read my mind, she suggested that we could always dip into our retirement account savings account for our share.

I was so stunned that without saying a word I simply tucked the "invoice" into my purse, and we left shortly after that.

My husband thinks we should just go along with Emily's plan, but I disagree; I don't appreciate being told what to do by my adult child.

Besides, taking $20,000 out of our retirement fund would most certainly create a financial hardship during our golden years.

What do you think?

--Stunned Grandma
Personally, Aunt Savvy feels Emily is being presumptuous and that you are absolutely under no obligation to contribute the specified amount prescribed by your daughter. In fact, you are under no obligation to contribute anything to your grand children's college accounts.

While it might be tempting to tell Emily to take her invoice and stick it somewhere else, you should refrain. You need to make clear to her about the extent (and limitations) of your support, but do so in a reasonable manner. Your daughter has acted in a boorish manner, but she is still your daughter and your access to your grandchildren.

Under no circumstances, should you punish the children for actions perpetuated by their mother; they own no guilt in this situation.

Given that you do intend to contribute something to their college funds, you and your husband need to sit down and crunch the hard numbers. You need to make clear to him that you are not happy with the extortion tactics practiced by your daughter and that you have no intention of accepting her billing scheme. He should be aware that your daughter is engaging in a form of familial blackmail, setting an ugly precedent for future interactions; if Emily is allowed to get away with this now, what is going to happen when the children need braces or surgery? Will you be receiving a "invoice" for that as well?

And what happens if you contribute what your daughter demands and your nest egg comes up short? Will Emily and Joshua then support you and your husband in your old age?

Not likely.

After you agree on an amount, then you need to talk to Emily and Joshua and let them know that you cannot pay this invoice, that any contributions to the college fund must be voluntary and at your discretion; moreover, any payments will be subject to adjustments should your financial circumstances change.

Be polite, but be firm; if Emily does not act in a reasonable manner, simply end the conversation and leave. Then try again until she can sit down with you for an adult conversation.

Instead of contributing to the parents' fund, you might consider setting up a grandparent's account for your grandchildren. That way, you would have complete control over the money until your grandchildren need it. You never know what might happen between your daughter and son-in-law and what would occur during a divorce action.

Each state has its own rules regarding college funds, so speak to an hourly-fee financial planner for advice (one who does not earn a commission on any financial instrument he/she sells). Get references from your credit union and/or trusted friends, and plan to invest only in safe financial instruments.

You mentioned that the great grandparents have also received invoices; while you cannot decide for them or pry into their financial situations, you should speak with both sets of parents (yours and your husband's), just to make sure that they have not been bullied into this billing scheme. If they choose to buy into this bullying, there isn't much you can do, but at least you will feel better knowing that you have made the effort to inform them.

On a final note, a piece of unsolicited advice: Aunt Savvy has discovered that college students who pay at least part of their own expenses do much better academically because they feel more invested in the process. Your daughter and son-in-law should be teaching their children the value of saving for their own educations, but if they can't or won't do it, perhaps you should consider filling in by having the grandchildren earn some money by doing some odd jobs for you and having them save part of their earnings in a special piggy bank (kept at your house) for each child.

Good luck!
Note: This is not a real question, but a what-if scenario based on a possible family problem. Aunt Savvy will always disclose when a question is based on a scenario.

Aunt Savvy would be pleased to consider answering your real questions for this site.


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