As grandparents consider the rising cost of living as well as increases in college tuition, they begin to see a need to save money and set it aside for their grandchildren's futures. There are several ways a grandparent can begin saving money that will grow as a child grows. When the child is an adult, the money will be there to give him a good start.
- Skill level:
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Things you need
- Upromise account
- Internet connection
- Trust fund
- Money market account
- 529 plan
- Savings bond
- Savings account
Sign up for a Upromise account. It's free and will allow you to save money for your grandchildren's college funds. Complete the boxes during the sign-up process with your grocery store savings cards. You can also enter your credit card numbers. Then, anytime you make a purchase from a Upromise partner, money is placed into your account.
Set up a trust fund account. You can set up an account for your grandchild that they will receive when they turn 21. Be sure that you will not need the money, because once you set up the account in your grandchild's name, the money legally belongs to her. You won't be able to get it back. You can make monthly payments into the account or set it up with one lump sum and let it grow through interest payments.
Set up a money market account. This option is good because the interest rate is higher than a savings account, but it also gives you the freedom to withdrawal money early if you think your grandchild needs it. For example, if you weren't planning on giving your grandchild all of the money until he turned 21 but he needs to buy college textbooks at 19, you could pull money out for the books.
Invest in a 529 plan if college is the reason behind saving up. This plan allows you to save up to £130,000 for each of your grandchildren without paying any estate or gift taxes, if you had chosen to give your grandchildren money that way. You can make payments into the 529 college savings plan and withdraw it in the future. A small fee will be incurred.
Purchase savings bonds in your grandchild's name. This option could be wise if you do it while your grandchildren are young. This way, the bonds will have reached maturity by the time your grandchildren are ready to cash them in. For example, a £16 savings bond may not be worth £32 until 10 years have passed.
Open a regular savings account in both your name and your grandchild's name. This is an option if you want to teach your grandchild about how to save at the same time you are saving up for her future. Your grandchildren can then help add to the account. This option earns the least amount of interest.
Tips and warnings
- Consider talking with a professional about investing in stocks. This is the most profitable way to save money for your grandchildren, but it is the riskiest if you don't know what you are doing.
- Always check to make sure there are no new tax laws that may affect your savings plan before opening an account.
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