Skip to main content

    College Savings for Grandkids

    Best long-term gift you can give. Tax-free growth.

    What a 529 plan is

    A special savings account. Money grows tax-free. Withdrawals tax-free if used for college (tuition, room/board, books, computers, even some K-12 private school).

    Two flavors:

    • 529 savings plan — invests in mutual funds. Most flexible.
    • 529 prepaid plan — locks in today\'s tuition rates at in-state public schools.

    Why grandparents love them

    • YOU stay in control — even though grandkid is the beneficiary, you decide when and how to spend.
    • Big growth over time — $100/month from age 0 = $50,000+ at age 18 with average market returns.
    • State tax deduction — many states offer deductions on contributions to your home state\'s 529.
    • Birthday gift — instead of toys, deposit $50 in their 529. Family can also contribute.
    • FAFSA-friendly (since 2024) — grandparent 529s no longer hurt grandkid\'s financial aid.
    • Roll to Roth IRA (new 2024 rule) — leftover $35,000 can move to a Roth IRA in the grandkid\'s name.
    • Change beneficiary — if one grandkid doesn\'t go to college, transfer to another.

    Best 529 plans

    • Utah\'s my529 — top-rated nationally. Open to anyone in any state. Low fees.
    • Nevada Vanguard 529 — Vanguard\'s low-cost funds. Open to all.
    • NY 529 (run by Vanguard) — top New York deduction.
    • Your home state\'s plan — best if your state offers a tax deduction. Check savingforcollege.com.

    How to open one

    1. Pick a plan (above).
    2. Apply online — 10 minutes. Need your info + grandkid\'s name and SSN.
    3. Pick an investment — most plans offer "age-based" portfolios that auto-adjust as the grandkid gets closer to college.
    4. Set up automatic monthly contributions ($25-200/month is typical).
    5. Tell parents — they can also contribute or use it for matching contributions.

    Other gift options

    • UTMA / UGMA account — kid gets full control at 18-21. Less restrictive than 529 but counts more against financial aid.
    • Series I Bonds — for younger grandkids. Tax-free if used for college.
    • Roth IRA for the working teen — once your grandkid has any earned income (16+), you can fund a Roth IRA in their name. Best gift you can give.

    Quick Tip — start the day they\'re born

    $100/month from age 0 to 18 at average 7% growth = ~$48,000. The same $100/month from age 12 to 18 only = ~$10,000. Time matters more than amount.