Episode 47: What’s the Best Way for A Grandparent to Save for A Grandchild?
Have your question answered on the Money Wisdom Question Series!
Thank you for joining us for episode 47 of our Money Wisdom Question Series, where we answer common financial and retirement investment questions. Today’s question is, “What is the best way for a grandparent to save for a grandchild?”
529 Plans
There are a couple of different ways that a grandparent can save for a grandchild. Flexibility is the key sometimes, but if flexibility isn’t needed and the saving is strictly for college education, a 529 plan, in my opinion, is the best way to go. Almost every mutual fund offers 529 plans that you can put money into. It grows tax-deferred as long as the money is used for qualified education expenses, primarily anything connected to college/university. All that growth is tax-free. When a child takes the money out, it’s tax-free. It’s not in the grandparents’ account, but the grandparent does maintain some control over it. If that particular child they had in mind does not go to school, they can change the beneficiary to somebody else that maybe is going to college. That’s a great way to save for a grandchild.
Custodial Accounts
What if the grandparent just wants to put money in a grandchild’s name to give them a fresh start in life? Well, you could use a custodial account. You could put money into a custodial account and as the money grows, if you buy and sell stocks or if you earn interest, you’re going to pay some taxes on it, but it is for the benefit of the grandchild. The grandparent can have the statements come to their house and can keep an eye on the account. They can even control the investments in the account.
Direct Gifts to a Grandchild
Another way for a grandparent to save for a grandchild is direct gifts. In 2021, an individual can gift $15,000 and $30,000 for married couples, which is tax-free.
There are a Number of Ways to Save for a Grandchild
There are a number of different ways to save for a grandchild. Typically, what you want to do is make sure you are all set yourself in retirement. You don’t want to impoverish yourself to give gifts to a grandchild. The key is when do you want the money to be used and do you want the money restricted in any way?
Thanks for joining me and I hope you found this information helpful!
P.P.S. Feel free to submit questions here for a chance to have them answered!
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.
Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
Related Resources
-
What Are the Biggest Regrets People Have in Retirement?
It’s natural to carry regrets through any stage of life, and retirement is no exception. When you’re making major decisions about your finances, your family, and your legacy, things can go off cou… -
How Do I Budget for Healthcare Costs in Retirement?
Healthcare is often one of the largest expenses you’ll face in retirement. With costs continuing to rise, how can you create a budget that not only covers this significant expense but also support… -
What Are 5 Signs That I’m Ready to Retire – or Not?
Knowing when you’re ready to retire usually isn’t a spur-of-the-moment realization. It often takes time, reflection, and careful consideration to decide when to take the leap. After all, there’s a… -
Working with a Financial Advisor
You wouldn’t let just anyone manage your money or guide you through one of life’s most pivotal milestones. Knowing who to trust with your retirement can make all the difference. With so much on yo… -
How Much Should I Keep in Cash During Retirement?
Having cash on hand can provide a sense of stability and peace of mind at any stage of life. However, in retirement, holding too much cash may limit your long-term returns and erode your purchasin… -
How Much Money Do I Need to Retire Comfortably?
You’re not alone in wondering how much you need to save for a comfortable retirement. After all, you’ve worked hard to reach this milestone, and there’s peace of mind in knowing you’ve taken all t… -
How Does the Big Beautiful Bill Affect Me?
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, bringing significant changes to the U.S. tax code. But what does it mean for you? What actions should you consider? And… -
How Do I Know If My Financial Advisor is Doing a Good Job?
There’s plenty of discussion and debate around today’s question: “How can I tell if my financial advisor is doing a good job?” Instead of relying on preconceived notions, we believe the best way t… -
What’s the Right Medicare Plan for Me?
There is a lot to consider when choosing the right Medicare plan: How often do you visit the doctor? Do you have any chronic conditions? Do you take prescription drugs regularly? Answering these q… -
What Happens to My Retirement Accounts When I Pass Away?
What happens to your retirement accounts after you die depends largely on your personal situation and legacy planning goals. Are you single or married? Do you have children? Do you want to leave m…
