12 Ways Grandparents Waste Money on Their Grandkids

Grandparents love spoiling their grandchildren. It's practically part of the job description, isn't it? And it can be so much fun for both the grandparent and the grandchild, providing bonding time while assembling a newly bought toy or visiting somewhere special together. But in some cases, the spending can verge on wasteful. According to a 2018 AARP study, grandparents spend an average of $2,562 annually on their grandchildren, which amounts to about $179 billion each year. The reality is a child only needs so many toys. Here are some of the ways grandparents tend to go overboard — and ways that spending might actually be put to better use for everyone involved. 

Related: 15 Fun (and Cheap) Things You'll Want to Do with Your Grandkids

It's no secret that kids grow as fast as weeds. And while there's nothing wrong with buying grandchildren clothing and shoes, it makes zero sense to spend money on fancy designer brand names. Unless, of course, the primary goal is to simply buy the fancy threads to pass them down to another child within a matter of months. "A much better way that grandparents could spend money and time to help their grandkids is to buy their favorite books to read together with them, or buy educational board games such as Monopoly to play together with them," says Gladice Gong, personal finance blogger for Earn More Live Freely.

While it's great fun to shower a child with gifts, there's something to be said for moderation. "One of the biggest mistakes I see grandparents making is sending too many gifts," says Michael Bonebright, consumer analyst for DealNews. "One present is special, but a huge box full of goodies is overwhelming for kids. Most of the time, my kids would rather play inside the massive box that the gifts came in." If you're sending the grandkids presents through the mail, consider sending just one gift, which will cut back on costs and save money on the hefty postage bill as well.

Related: 38 Great Gifts to Buy Your Grandkids for Christmas

Grandparents also waste money when they keep the child's parents in the dark about certain gifts, says Bonebright. "A surprise vacation to Disneyland, for example, should only come as a surprise to your grandkids. If their parents don't know what's up, you could lose thousands of dollars on a cancelled trip and hurt family relationships."

Related: 19 Expensive Mistakes to Avoid at Disney

Helping your grandchild fund his or her college education is truly a gift that will last a lifetime. But in order to make the most of it, do your homework, says Jack Schacht, founder of My College Planning Team. "According to a survey by Fidelity Investments, more than half of American grandparents are either helping to fund their grandkids' tuition or planning to do so down the road," says Schacht. "However, it's not nearly as simple as writing your grandchild a nice big check." To avoid financial pitfalls, Schacht suggests learning about tax-advantaged 529 college savings plans, which have many benefits, including the fact that they won't impact financial aid eligibility, and withdrawals won't be taxed if the money is used for qualified educational costs.

Related: Student Loan Debt Across America: Where Does Your State Rank?

While there's little more special than a lovingly handmade gift from a grandparent (as opposed to another easily forgotten store-bought item), you may want to time such gifts for special occasions, says Bonebright. "Materials like quilt fabric and yarn can be extremely expensive, so don't work your fingers to the bone making a million crafts for kids," he notes. "One source suggests that the materials for a queen quilt can cost $360, and construction can take 40 or more hours. Rather than cranking out tons of crafts for your grandkids, save your creations for special occasions like graduation. Your grandkids will appreciate your hard work much more then."

Every holiday season there's at least one or two must-have hot toys. And some of those popular items can be quite expensive. While grandparents love spoiling their grandchildren, super-expensive toys are not worth it, says Morgan Taylor, finance expert for LetMeBank. "The best part of Christmas for kids are the boxes and the wrapping paper, so don't worry about spending a lot of money on toys that they'll forget about before dinner that evening," says Taylor, who instead suggests getting just one toy that comes in a large box to wow the grandkids.

The winter holidays are nearly here, and what grandparent doesn't love outfitting their grandchildren in special clothing for the season? But much like the wastefulness of purchasing designer clothing for children, spending excessively on holiday attire can end up being a gigantic waste of money. "Because holiday clothing is often crafted from delicate materials like lace, fancy kids' outfits are not designed for active children," says Bonebright. "Spending $100 on a dress that will likely only be worn once to a Christmas Eve service or family photography session is a total waste. Invest in cheap, durable clothes your grandkids can play in every day."

When a child is under 3 years old, they don't really register the price of a gift, says Jill Gleba, wealth manager and president of Gleba & Associates. "This is a great time to start a 529 college fund or a UTMA (Uniform Transfers to Minors Account) account for their grandchild," she says. UTMAs were created as vehicles to allow a minor to receive gifts ranging from money to real estate and even fine art.

Purchasing a brand-new car is rarely a good idea, no matter who it's for, as it's well-known that new cars lose value once driven off the dealer's lot. Gleba suggests grandparents never waste money in this way on a grandchild. "Buy something used," she notes, "or offer to match the kids 50 cents on the dollar and see how well they take care of a car that they earned themselves. I'm sure they will value what they buy, rather than a gift."

While purchasing a gaming console or the latest Fortnite release for your grandchildren might make you a cool grandparent in their eyes, it's unlikely to have any long-term benefit in your child's life, says Todd Christensen, of the non-profit MoneyFit.org. "It may even have negative effects for those who have compulsive tendencies or struggle with time management."

Yet another spin on the ways grandparents waste money on trips and vacations for the grandkids is by paying for overly expensive getaways, says Gleba. "For example, instead of Hawaii, you could go to Florida. The beach is beautiful, and the kids do not know the difference." The key point is that kids will have just as much fun on a sandy beach that doesn't require spending a small fortune to get there, says Gleba.

Give a man a fish, they eat for a day. But when you teach someone to fish, they eat for a lifetime. "Grandchildren are handed everything nowadays. None of them are taught lifelong lessons," says Patrick Simasko, an elder law attorney at Simasko Law. "If grandparents give their grandchild $500 for Christmas, it's likely only going to last until the next iPhone comes out." Instead, Simasko notes, grandparents could consider opening up a brokerage account that's self-managed. "Vanguard or Scottrade have these types of accounts," he says. "Then, instead of giving the grandkids $500, deposit that money into the new brokerage account and sit down with the grandchild and explain how investing, time, and value of money works."