By Claes Bell, CFA for Bankrate.com
The grandma check, filled out in careful handwriting and mailed well in advance to ensure timely delivery, is a treasured part of many Americans’ birthday or holiday traditions.
But while the concept is simple, the art of grandma check-giving can be pretty complicated.
Send too much, and you risk setting a precedent that will drain your bank account year in and year out, especially if your extended family grows. Send too little, and your gift may not have the impact you’re looking for.
How much to send?
A good rule of thumb for most middle-class households is $25 to $50, says Jodi RR Smith, president of Mannersmith Etiquette Consulting. But that amount may not work for everyone. The key is making sure you don’t let it get out of hand, she says.
“Especially with new grandparents. This is the first grandchild; they’re so excited (and) they want to be generous,” she says. “But I want them to stop and think: This may be their first grandchild, but it might not be the last grandchild, and whatever they’re doing is setting a precedent going forward.
“There’s a chance that this can turn into a very big thing very quickly,” she says.
Grandma check can be a budget buster
Being a grandparent can get expensive. The vast majority of grandparents — 95 percent — buy holiday and birthday gifts for grandchildren, according to a 2012 AARP survey.
My own grandmother, Addie Bell, faithfully sent all of her grandchildren $25 to $35 for Christmas and our birthdays every single year until her death in late 2014. I always looked forward to seeing them in the mail, even after we’d all stopped cashing them.
But Addie had eight children of her own, who in turn gave her 19 grandchildren. That means she was writing something on the order of $1,330 a year in grandma checks, which I imagine took a toll on her finances even though we mostly stopped cashing those checks toward the end of her life.
It’s not unusual for grandma checks to become something of a financial burden, Smith says.
“Things can multiply and get exponential quickly,” she says, so it’s important to keep that in mind when you’re setting the initial amount.
Etiquette issues
While an appropriate amount for the grandma check is different for every grandma, there are some ground rules that can help make sure the gifts are well-received and don’t get out of hand.
1. Always give within your means. Hurting yourself financially in the name of the grandma check is not a good idea, Smith says.
“Gift giving, no matter who’s giving the gift, is based on and dependent upon the giver’s finances,” Smith says. “If you’re having a good year and you can give more, that’s wonderful. But if you’re having a tough year and need to give less, that’s perfectly understandable. You need to give based on what your budget can allow.”
2. Communicate with parents. It’s always good to let parents know ahead of time you’re going to send a grandma check, and how much you plan to give, says Nancy Mitchell, owner of The Etiquette Advocate, a protocol and etiquette consulting firm.
They may have ideas about exactly how much money they want a child to have in their pocket or how that money should be given — such as into a college fund — so it’s a good idea to run your plans by them first, Mitchell says.
“Don’t make a decision without checking with the parents,” Mitchell says.
Also, it may go without saying, but don’t expect even a large grandma check to buy additional access to or influence over grandchildren, Mitchell says.
3. Fairness is key. If you send a grandma check to more than one grandchild, making sure you send the same amount may save you headaches later, Smith says.
“So they don’t have a grandchild or a child saying, ‘But you gave that one this much.’ And we hate to think people do that, but let’s face it, they do,” Smith says.
Mitchell agrees.
“People talk,” she says, so it’s best to give equally among grandkids. Grandparents can make an exception for extraordinary one-time events, such as a high school graduation.
4. Manage expectations. Making any sort of long-term grandma check commitments isn’t usually a good idea, Mitchell says.
“Don’t say ‘I’m going to give each grandchild $500 every year,'” Mitchell says. “It may not be possible.”
And if you do plan to cut your grandma check way down compared to previous years or stop sending it altogether, it might be good to let recipients know ahead of time, Mitchell says.
5. You don’t have to adjust for inflation. Don’t feel the need to increase your grandma checks to keep up with inflation, Smith says.
Many grandparents are on fixed incomes, so their budgets just may not allow a steady ratcheting up of giving, she says.
“If your finances allow you to give just a fixed amount, that’s fine, because it’s all about the thought,” Smith says. “This is really ‘I’m remembering you on your birthday.’ And it’s hard to complain about a grandparent remembering a grandchild.”
6. Take the opportunity to teach. If there’s a particular number that has significance in your family or your culture, such as the date you were married or the date you were born, you can incorporate that into the amount you give to impart the significance to your grandchildren, Smith says.
Also, if you don’t get a thank-you note, feel free to use it to teach a lesson on the importance of expressing gratitude, as well, Smith says.
“Stop giving gifts, start giving thank-you-note stationery until they start writing the thank-you notes, and then go back to giving your monetary gift,” she says.
Why grandma checks are still awesome
After all this, it may seem like grandma checks are more trouble than they’re worth, but don’t give up. Grandma checks aren’t just a cultural institution. From an economic perspective, they’re extremely efficient, says Joel Waldfogel, Frederick R. Kappel Chair in Applied Economics at the University of Minnesota’s Carlson School of Management.
It turns out effective gift-giving is really hard, Waldfogel says.
“The bottom line is, givers aren’t very good at it, especially givers who are in infrequent contact with recipients,” he says. “Aunts and uncles and grandparents are in the worst possible situation. They typically are in infrequent contact with their recipients, and so when they choose a (gift), it turns out to be the wrong thing. And that’s probably why they’re most likely to give cash.”
That may be why giving grandkids cash is socially acceptable, while giving cash to other loved ones isn’t.
“Normally giving someone cash is kind of socially awkward,” Waldfogel says. “It’s weird to give your girlfriend cash; it’s weird to give your parents cash. But, it’s OK in our society for grandparents to give cash to grandchildren.”
