There’s something special about becoming a grandparent. (Just ask Dave Cimarolli, a financial advisor here at CEC. Congrats Dave!)
A new grandchild brings excitement, joy, and often a new perspective on legacy. Many grandparents naturally begin thinking about the future: How can I help provide opportunities for this child someday? What’s the best way to support them financially without overcomplicating things?
The good news is that even modest, thoughtful planning today can create a meaningful impact over time. Whether your grandchild was just born or is already heading off to school, here are a few ways grandparents can help support their future while staying aligned with their own financial goals.
1. Open or Contribute to a College Savings Plan
For many families, a 529 plan is one of the most flexible and tax-advantaged ways to help save for education expenses. Contributions grow tax-deferred, and qualified withdrawals for education expenses are tax-free. Depending on the state, there may also be state tax benefits for contributions. For example, Illinois residents may also be eligible for a state income tax deduction when contributing to qualifying Illinois 529 plans, including Bright Start and Bright Directions.
Grandparents can:
- Open a new 529 account for a grandchild
- Contribute to an existing parent-owned account
- Make one-time gifts or ongoing monthly contributions
- Encourage other family members to contribute for birthdays or holidays
And while college is often the focus, many 529 plans can also be used for certain K–12 expenses, trade schools, and other qualified educational programs.
Families may also hear discussion around newer child-focused savings proposals, including “Trump Accounts,” which are intended to encourage long-term investing for children. As legislation and rules continue to develop, it’s important to compare any new account options alongside established tools like 529 plans and custodial accounts to determine what best fits your family’s goals.
2. Consider Custodial Investment Accounts
A custodial account, such as a UGMA or UTMA account, allows grandparents to set aside investments for a child’s future benefit. These accounts can provide flexibility because the funds are not limited strictly to education expenses. The child can eventually use the money for things like:
- Education
- A first vehicle
- Starting a business
- A future home purchase
However, custodial accounts do become the child’s property once they reach the age of majority, so it’s important to understand both the advantages and tradeoffs before opening one.
3. Start Small and Stay Consistent
One of the biggest misconceptions about gifting or saving for grandchildren is that it requires large sums of money. In reality, consistency often matters more than size.
A modest monthly contribution made consistently over many years can benefit from long-term compounding growth. Even small contributions for birthdays, holidays, or milestones can add up over time. Sometimes the greatest gift is simply creating a habit of intentional planning.
4. Use Gifts as a Teaching Opportunity
Financial gifts can also become opportunities to teach important money lessons.
As grandchildren get older, grandparents may choose to:
- Match savings contributions
- Help them learn about investing
- Explain how compound growth works
- Encourage budgeting and charitable giving
These conversations often become just as valuable as the dollars themselves.
Creating a Lasting Legacy
Legacy isn’t always about leaving behind a large inheritance. Often, it’s about creating opportunities, sharing values, and helping future generations start from a stronger financial foundation.
At CEC Financial Group, we understand that financial planning is deeply personal and often family-centered. Whether you’re exploring education savings strategies, tax-smart gifting opportunities, or long-term legacy planning, our team is here to help you evaluate options that align with your goals and values.