What are the Best Investments for Grandchildren?
Many grandparents spend time trying to figure out how best to save money, but fail to invest it in ways that would help their grandchildren. This is a huge mistake.
By starting early and investing steadily, the money you grow for them can benefit them financially, personally and professionally.
Why Invest for Grandchildren?
The cost of college tuition is sky-high these days. In fact, for many families it’s the most expensive cost they’ll ever have to face! And that cost just keeps rising every year.
What Costs do Grandkids Face?
Investment Accounts for Grandchildren: Taxable
As the custodian, or trustee, you manage the account until the child reaches the age of majority (18 to 21 years of age, depending on your state). Once a grandchild reaches the age of majority (adulthood), they become the account owner and can do as they please with the funds.
1. Custodial Account
Investment Accounts for Grandchildren: Taxable
Traditionally, these plans could only cover the qualified educational expenses for college but tax reform broadened the eligible expenses to cover K-12 costs as well.
2. 529 Plan
College Savings Plans replicate similar mechanics of other tax-advantaged savings plans like 401(k)s and individual retirement accounts (IRAs). Contributions you make get invested into mutual funds or other investment vehicles like age-based investments called target date funds.
College Savings Plans
While not available in every state, prepaid tuition plans (also called guaranteed savings plans) allow you to freeze today’s tuition rate for when your grandkid attends college in the next 18 years.
Prepaid Tuition Plans
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