As grandparents, it’s natural to want the very best for your grandchildren. After watching your children grow up and start families of their own, it’s heartwarming to now be in a position to be supportive and involved with your grandchildren. As a good education is one of the key factors that will define a child’s success in life, contributing to a grandchild’s college savings account is one of the most beneficial ways to secure a promising future. Depending on the savings strategy, there are a couple different ways to go about this that will ultimately help prepare for and fund a child’s education.
Define College Savings Goals
One way you can help, before making contributions to a college savings account, is having a conversation with the parents about a college savings plan for their child. Do they already have a college savings account set up? If so, are others able to make contributions to this account easily? How much control do they have over how the funds are spent? What types of educational expenses will the funds cover? These are all things that should be taken into consideration when opening a new college savings account.
A scenario you may run into is the parents not having a savings strategy for their child at all. The thought of setting up a college savings account can be intimidating, especially for parents who feel they don’t have the means to invest. Some parents share the mentality of thinking that they have plenty of time after a baby is born to get everything set up when their child is older. Although it’s easy to put off, it’s vital that parents start saving early and consistently to avoid having to take out loans and make heavy interest payments down the road. Additionally, parents don’t need a hefty sum of money to open a college savings account. In some cases, such as with a College Savings Trust, an account can be opened with as little as $25 to start. It’s always helpful to provide some insight and direction in this way for parents who may be feeling overwhelmed by the process.
Control of College Savings Funds
Whoever creates the account is the one who has first control over how and when the funds are used. If the grandparent creates the account, then future disbursement requests will be addressed to them, not the parents. This has been a very common way for grandparents to securely save for their grandchildren, without worrying about having the funds used as a piggy-bank for inappropriate things. Additionally, if the parent has created the account, and there isn’t a concern about use-of-funds, then it’s extremely easy for grandparents to contribute to the College Savings Trust.
Which College Savings Plan is Best?
For grandparents wanting to define the college savings goals for their grandchild, and contribute funds towards their college savings, it’s a good idea to review the different types of college savings accounts on the market. The most common types of college savings accounts include the 529 plan, Coverdell Education Savings Account (ESA), UGMA custodial account, and College Savings Trust. The factors you want to weigh when choosing an account include the impact these plans will have on your grandchild’s eligibility to receive financial aid and if there is a limit to contributions that can be made to the account.
Give the Gift of Education
The right approach to a situation where there is not yet a college savings plan in place is to simply open an account on their (the parents) behalf. A College Savings Trust by Prime Trust is an ideal way to get the ball rolling. After the account is open, the parents (and other family members and friends) can contribute however they want, as often as they want. A modest monthly contribution of just $50 or $100 can grow substantially over the years and will make a significant dent in college expenses when it’s time for your grandchild to attend college.
A College Savings Trust also makes it easy for grandparents to give the gift of education and contribute additional funds on birthdays, holidays, or whenever they feel like making further deposits. The family can also share a unique link that will allow others to securely contribute gifts (funds) to the account at any time. Best of all, there’s no impact on financial aid eligibility with a College Savings Trust. In addition, there are no limits on the amount of contributions that can be made to this account, so there is no need to worry about being penalized for exceeding any particular amount.
More so today than ever before, grandparents are taking a more active role in helping fund their grandchildren’s college education. With the cost of college tuition and other expenses on the rise, these additional contributions are sure to make a difference to the entire family. There’s no better way to spoil your grandchildren than to help them graduate from college debt-free and ready to build a successful career.