Every grandparent wants to see their grandchildren thrive. While love and emotional support are irreplaceable, offering financial guidance and resources can also make a lifelong impact. Thoughtful financial gifts give your grandkids tools to pursue their dreams, navigate life’s challenges, and build a secure future. It’s not just about money; it’s about creating opportunities and leaving a legacy of love. Here are seven ways you can invest in your grandchildren’s future.

Start a 529 College Savings Plan

A 529 plan is a tax-advantaged savings account designed to cover education expenses. Contributions grow tax-free, and withdrawals are also tax-free when used for qualified education costs such as tuition, books, supplies, and room and board. These accounts can also be used for K–12 tuition, trade school, and student loan repayment (up to certain limits). As the account owner, you control the funds and how they’re used, even when the beneficiary reaches adulthood. Starting early can lead to significant growth through compound interest, and many plans allow for easy, automated contributions. Friends and family can contribute, too, allowing others to also support your grandchild’s education.

Contribute to a Roth IRA

While it may seem early to think about retirement, a Roth IRA can be a powerful tool for a young person’s future. Contributions are made with after-tax dollars, meaning taxes have already been taken out, and the account grows tax-free over time. Once your grandchild reaches retirement age (currently 59 ½), qualified withdrawals are tax-free. Even before then, contributions (but not earnings) can be withdrawn without penalty, which could help with major milestones like buying a first home. The one caveat is that the child must have earned income to contribute to a Roth IRA.

Fund a Custodial Account (UTMA)

A custodial account under the Uniform Transfers to Minors Act allows you to gift money or assets to a child. You manage the account until they reach the age of majority, which is 18 or 21, depending on the state you live in. These accounts can hold cash, stocks, bonds, and more, offering the potential for long-term growth. The money legally belongs to the child and can be used for anything that benefits them. However, keep in mind that these funds may impact future financial aid eligibility.

Consider CDs and Savings Bonds

For a low-risk option, consider certificates of deposit (CDs) or U.S. Savings Bonds. CDs offer a fixed interest rate over a set period, while Series EE or I Bonds provide a combination of fixed and inflation-adjusted interest rates. These options may not offer the same growth potential as stocks, but they can be a safe and reliable savings option for grandchildren.

Teach Financial Literacy

One of the most valuable gifts you can give is the knowledge and skills to manage money wisely. Start with age-appropriate lessons about saving, spending, and budgeting. Use everyday situations like grocery shopping or allowance to teach basic skills. As they grow, introduce more complex topics, like investing, credit, and the importance of giving back. Share your own experiences, both successes and mistakes, to personalize the lessons and make them feel real. Books, games, and apps can also make learning about money fun and engaging.

The Gift of Life Insurance

Purchasing a life insurance policy for a child may not seem like a traditional financial gift, but it can offer long-term benefits. Some policies, like whole life or universal life insurance, build cash value that can be borrowed against or withdrawn later for education costs, a home down payment, or other future needs. Premiums are generally lower when the policy is purchased for a young, healthy individual. In the unfortunate event of the child’s death, it can provide financial support for the family. It’s a practical gift that adds an extra layer of security.

Include Grandchildren in Your Will

Leaving assets to your grandchildren in your will is a direct way to provide for their future. This could include money, investments, or property. One major benefit is the “step-up in basis” provision, which resets the value of inherited assets to the current market rate at your death, potentially reducing capital gains taxes if your beneficiaries sell later. Be sure to consult an estate planning attorney to ensure your will is structured properly and reflects your wishes.

Financial gifts for grandchildren are an investment in their future. Remember to consider their individual needs and goals and choose gifts that align with your family values and financial situation. By planning wisely, you can leave a legacy of financial well-being for generations to come.

Exploring financial gifts for your grandchildren? Contact our experts to help you find the perfect option for your family.