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Smart Ways to Give Financial Gifts to Your Grandkids Thumbnail

Smart Ways to Give Financial Gifts to Your Grandkids

Giving gifts to your grandchildren is one of life’s greatest joys. But while toys and gadgets bring short-term happiness, financial gifts can provide lasting benefits. Whether you want to help with education, invest in their future, or teach smart money habits, there are ways to give that go beyond just writing a check.

1. Contribute to a 529 College Savings Plan
College costs continue to rise, and a 529 plan is a great way to help. Your contributions grow tax-free when used for education expenses, and some states even offer tax benefits for contributing. The best part? The funds can be used for tuition, books, and even K-12 private school expenses.

2. Set Up a Custodial Account (UGMA/UTMA)
If you want to give money for more than just education, a custodial account under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) allows you to invest in their future. Once they reach adulthood (age varies by state), they gain control of the funds, which can be used for anything from buying a first car to starting a business.

3. Teach Investing with a Custodial Roth IRA
If your grandchild has earned income—like babysitting or a summer job—you can help them start a custodial Roth IRA. This allows them to invest and grow their money tax-free for the future. Even small contributions now can turn into a significant amount over time, teaching them the power of long-term investing.

4. Give a Meaningful Cash Gift (With a Strategy)
A cash gift is always appreciated, but consider attaching a lesson to it. For example:

  • The "Save, Spend, Give" Rule – Encourage them to split the money into saving for the future, spending on something they want, and donating to a cause they care about.
  • A Matching Contribution – If they save a portion of the gift, offer to match it to reinforce good saving habits.

5. Help Fund a First Home or Business
If you’re thinking long-term, financial gifts can help your grandkids buy their first home or start a business. Annual gifts up to the IRS gift tax exclusion limit ($18,000 per person in 2024) can be given tax-free, and a well-planned gift can make a huge difference in their future.

The Best Gift? Financial Wisdom

No matter how you choose to give, the real gift is financial knowledge. Talking to your grandkids about money—how to save, invest, and spend wisely—can set them up for a lifetime of smart financial decisions.

Want to explore the best way to give based on your situation? Let’s chat about a strategy that works for you and your family.