Are you a grandparent? Have you ever thought about paying a portion or all of your grandkids college costs? As a grandparent myself, I’ve dreamt of being able to provide this for my granddaughter. After all, children are our future of this world. Is this a realistic dream or financially possible?
As a grandparent, I need to consider my own financial security before paying for college for my granddaughter. If you are or your financial advisor agree you are financially sound to take on a grandkids college fee, below are suggestions to help begin to make this dream come true:
- Set up a trust fund account. You can set this up for your grandchild so that they receive it when they are 18, 21, or any other age you choose. It’s important though when setting a trust fund up, you will not need this money.
It legally belongs to the grandchild and you will not be able to get it back. If you wish to do this, you may set it up with one lump sum of money which will grow through interest payment or you may make monthly payments into this account.
- If you want a higher interest rate on your money, you might want to set up a money market account. This kind of account also gives you, the grandparent, the freedom to withdraw money early if you feel your grandkid needs it.
- Do you wish to save up to $200,000 for each grandchild? If so you may wish to consider investing in a 529 plan if college is the reason behind the savings. This plan also allows you to save without paying estate or gift taxes.
But only if you choose to give your grandchildren money in this way. You make payments into the 529 college savings plan and withdraw it in the future but be aware a small fee will be incurred.
- Another way to put money aside is to purchase savings bonds in your grandchild’s name. If you start this option when the child is young the bonds will reach maturity by the time the child is ready to cash them in.
- You may also wish to open a regular savings account in both your name and the child’s name. Although this option earns the lowest amount of interest, it is a great way to teach your grandchild about the value of saving.
Another option here would be to open a 529 Plan in whatever state you choose. This would allow you to contribute money to for their college associated costs.
This is a nice option for many grandparents who have family that is in another state as contributions can be made by mail.
Before you act on any of the above ideas, it is always best to contact a professional about investing. Also, no matter how you intend to set up a savings account for your grandkids, always be sure to check there are no new tax laws which may affect your savings plan before you open any account.