Best savings plan/account for grandkids?

[maslex]

I have four grandkids. Two grandsons age 10 and 3. And twin granddaughters that are also 3. I've always been the grandmother that would buy all the things for their birthdays, Easter, Christmas, etc. Clothes, games, toys, books, more toys. It's like my brain thinks that I'm the only one in the family who buys them stuff and if I don't buy it all, they'll have nothing. LOL Well, low and behold..............they have way too much! I'm to the point where I don't want to buy all the stuff anymore. I'd like to get them one thing that they really for their birthday/Christmas and then deposit money into an account for them, for when they get older. Should I get them a regular savings account or are their other accounts out there that would benefit them better in the future? Thanks!

 

[irlandaise]

That's a great idea, Grandma! Is your intention for the kids to have money they can spend however they like? Or would it be for a special purpose, such as education?

If the former, a savings account that they could deposit into and withdraw from when they're old enough (like the 10-year-old) to understand the concepts would be a great way for them to learn about handling money properly.

If the latter, check into tax-advantaged education savings accounts, such as 529s.

 

[TheOneWithTheTriplets]

Do you specifically want to maintain control of the money?

I ask because my father writes a check each year for each of the grandkids but he didn't establish accounts or anything. We deposit into the kids' savings accounts that we as the parents are the custodians on.

As they've gotten more money, we've balanced how much to leave in savings, invest in CDs, and invest in brokerage accounts, etc. We can see the full extent of their savings and adjust accordingly to generate good returns and pay attention to how various account types will be treated when the time comes to apply for financial aid for college.

 

[clh2]

Obviously, you should have a conversation with your children, to see what their preference is.

We do 529’s for our grandsons.

 

[Brian Noble]

Yes, a conversation with the parents is a good idea.

We do 529’s for our grandsons.

My mother contributed to our kids' 529s. It was appreciated---especially now that they are in graduate school. The usually have teaching appointments that are enough to pay the bills, but the money left in their 529s gives them some breathing room.

 

[Frwinkley]

I have two very young grandchildren (2 1/2 and 3 months).

We opened 529s for them as soon as they were born and contribute each month to both of those accounts.

We also inherited some money from my mother. We took $10k of that money and opened a brokerage account for the grandkids and add money to that every month as well. That money is in our control, but earmarked for the grandkids. The intent of that money is for them to split it and use towards a wedding, house, etc. As we get older, we'll make my DD the beneficiary of that account (she's the mom of both grandkids).

My MIL had a small life insurance policy with my DD as the beneficiary. When my MIL died, that money became the funds that my DD and her husband used as a down payment for a house.

I love buying these two grandbabies things! But like you OP, I know these kids get so much from so many people!

 

[maslex]

Yes, definitely plan on having a conversation with my son & his ex about this. Was just curious what other people might be doing with their grandkids.

 

[easyas123]

We've got a brand new grandchild, and are researching this as well. I think we are leaning towards a 529.

 

[disneychrista]

Until reading about it on the Dis, I never knew that this was a thing grandparents did. My grandparents didn’t and neither did my parents for my daughters. I don’t have grandchildren but it is not something I think i’d do either.

Just how much money is expected to be contributed? How much in the end will it actually be?

 

[easyas123]

Just how much money is expected to be contributed? How much in the end will it actually be?

I think it's a newer financial tool (I think they started in the 80's or 90's) that some folks take advantage of, as plans such as 529's & similar have become available. I can't speak to other folks situations, however it is not something that is expected in our family - rather it is something that my husband and I want to do for this grandchild and any future grandkids. No specific amount is expected, I presume there may be some regulations on maximums...presumably the amount contributed will be in line with a person or families budget & financial position. As far as how much will it be worth in the end??? Well I guess that depends on what is put into it over the years. I expect our financial situation could change over the years and that could change how much we do or don't put into it as well.

 

[Frwinkley]

Until reading about it on the Dis, I never knew that this was a thing grandparents did. My grandparents didn’t and neither did my parents for my daughters. I don’t have grandchildren but it is not something I think i’d do either.

Just how much money is expected to be contributed? How much in the end will it actually be?

My grandparents didn’t do this and neither did my parents. They simply didn’t have the means. However, my in-laws did.

There is no expectation about this—it is just something we choose to do.

529 plans are for college expenses (there are some other things too). The beauty of such a plan is that the money grows tax deferred. When used for qualifying expenses, the beneficiary pays no taxes on that money.

I’m a pretty practical person and for me, I’d rather to this than buy clothes or toys that may go unused.

 

[Brian Noble]

Until reading about it on the Dis, I never knew that this was a thing grandparents did.

I think this is a thing that is different in each family. It isn't so much "a thing that grandparents do" as it is "a thing that some people do and others don't." For example, in my extended family, we tend not to give much in the way of "things" as gifts to each other. My mom and my dad each gave the kids cash instead---my Mom tended to contribute to a 529. my Dad tended to write a check, especially as they got older.

Other families are more likely to give tangible gifts instead, and some families may not have a tradition of gift-giving at all! Any of these are just fine.

And, I think it is wise for a grandparent to talk to the parents about what they'd prefer. In some families, contributing to a 529 would be viewed as an attempt at exerting control over the parents if it was done without a conversation first. For example, we had already set up 529s for our kids, so having my Mom contribute to one as well was a good fit. But that's because my ex and I were both willing to put resources towards that purpose. A 529 is a double-edged sword; earnings are not taxed if they are used for educational purposes, but the are taxed and penalized if they are used for anything else. If we did not want to put resources towards higher education---and not everyone wants to do that---it would have been much less helpful for my Mom to do that on her own.

 

[Dan Murphy]

A 529 is a double-edged sword; earnings are not taxed if they are used for educational purposes, but the are taxed and penalized if they are used for anything else.

Funds not used for education can be rolled into a Roth IRA, with limitations. Otherwise, yes, tax and 10%penalty on the earnings.

We have been funding 529 accounts for our 5 grandkids since they were toddlers. An automatic nominal deposit every 2 weeks to each of their accounts. Not enough for sure to pay for a four year college, but better than nothing.

 

[mjkacmom]

I really appreciated my parents for their 529 contributions! It’s amazing hike much the money grows.

 

[Simba's Mom]

I have four grandkids. Two grandsons age 10 and 3. And twin granddaughters that are also 3. I've always been the grandmother that would buy all the things for their birthdays, Easter, Christmas, etc. Clothes, games, toys, books, more toys. It's like my brain thinks that I'm the only one in the family who buys them stuff and if I don't buy it all, they'll have nothing. LOL Well, low and behold..............they have way too much! I'm to the point where I don't want to buy all the stuff anymore. I'd like to get them one thing that they really for their birthday/Christmas and then deposit money into an account for them, for when they get older. Should I get them a regular savings account or are their other accounts out there that would benefit them better in the future? Thanks!

This dilemma could have been written by me. Only the ages and sexes of our grandchildren are a little different. After considering different options, we went with 529s.

 

[maslex]

Until reading about it on the Dis, I never knew that this was a thing grandparents did. My grandparents didn’t and neither did my parents for my daughters. I don’t have grandchildren but it is not something I think i’d do either.

Just how much money is expected to be contributed? How much in the end will it actually be?

Nothing is going to be "expected" to be contributed. It's whatever we decide to give as a birthday or Christmas gift that year. Be it $20 or $100. And who knows how much will be there in the end. Whether it's $100 or $10,000, it's more than what they had before they got access to the acct. LOL

 

[tvguy]

Obviously, you should have a conversation with your children, to see what their preference is.

We do 529’s for our grandsons.

We have a regular bank account that is completely under our control for our Granddaughters, ages 1, 3 and 6. Their parents do not know about it, and will not. We are hoping to do what my mom did. Our oldest is 4 years older than our youngest, and went to a private University. He got first dibs on our college fund. When our youngest started University, she selected a public University that was a whole lot less. We were able going to be able to afford that from our paychecks, without going into the College fund. But my mom stepped up and paid the first year tuition and room and board as a surprise. We hope to do that.
As for our kids, we did not use a 529 plan. I did not like the restrictions, and sacrificed the tax benefit so we could decide what to do with the money. Our financial advisor and CPA were comfortable with that choice, and with our current choice. That is about the only aspect of my financial planning that is not entirely focused on reducing or deferring my tax liability.

 

[lovesmurfs]

I was thinking 529 for our granddaughter, but I went ahead and did a mutual fund in my name, because my DDIL didn't want to give me DGD's SSN to start the account.

And same as @tvguy - It's not a tax benefit or deferred taxes, but it's a solution. DH is the beneficiary now, but knows it's for DGD. DS is the contingent beneficiary if we both pass.

 

[OhDannyBoy]

My wife's parents and grandparents did this for her back in the early 80's. They invested in a lot of stocks and things that sail over my head.

Long story short when we were married in 2010, some of the money she had made through stocks and various investments was used as a down payment on our first house.

My in-laws have continued the tradition for my girls. I'm not great with any of this so what exactly we have set up I'm not sure.

But the central idea is a wonderful one in my opinion.

 

[disneychrista]

Nothing is going to be "expected" to be contributed. It's whatever we decide to give as a birthday or Christmas gift that year. Be it $20 or $100. And who knows how much will be there in the end. Whether it's $100 or $10,000, it's more than what they had before they got access to the acct. LOL

What I meant by "expected" was how much did the person contributing to the account expect to contribute, that a college savings account would even be worth it.