Gift for a Grand Baby?

[Fishindude77]

We've had a new grand baby now for a few months. The wife and I would like to sock a little money away for this kid now, to be used earn some interest and be used after age 18 for education, a house, or something important. $1 - 5,000 wouldn't be a problem.

Would be curious to hear if others have done something like this, and what you might recommend?

[Thrif-t]

Well if it were me I'd consider opening a 529 plan but that would strictly be for college. Open it in your name with the grandbaby as the beneficiary. That way it won't be counted in any financial aid packages if its in your name. But that's just me, in my family it's just expected everyone is going to college. Oh one other thing some states give you a tax deduction for your contributions so maybe that would help you. This site has a lot of information on 529 plans,

http://www.savingforcollege.com/intro_to_529s/what-is-a-529-plan.php

When I was young we'd get savings bonds. I really don't know much about them anymore but Series EE can be redeemed for education and you don't have to pay taxes on the interest(if they still sell EE??). Plus savings bonds could be cashed in if you want grandbaby to use it for other things in life.

I think it's nice you're thinking about setting something aside for your new grandbaby he/she is very lucky to have you

[snafu]

My dad initiated Mutual Fund accounts for each of our DSs and encouraged other family members to contribute small amounts for birthdays, Christmas and special events in our guys lives rather than gifts of toys or sports equipment etc. Those accounts amassed a huge amount over 18 years due to the magic of compounding and reinvesting dividends. There were still presents given to unwrap but of lessor value/cost. There are now DCA [Dollar Cost Averaging] systems that allow monthly purchases to smooth out unit costs but they are hardly a factor over 18 or 20 years.

[Drake3287]

Agree about giving US Saving Bonds, my parents did the same for my 3 kids. There are a ton of investment idea's out there but a simple Savings Bond will give them a guaranteed sum to help off set college costs down the road.

If you plan to have the used for college related costs, just make sure you use the parents social security number, not the kids. I ran into this problem with two of my kids bonds. I was paying the college costs and declaring them as a dependent on my taxes but when the kids cashed them in they had to pay taxes on them because I was paying the educational costs, not them.

[Thrif-t]

Agree about giving US Saving Bonds, my parents did the same for my 3 kids. There are a ton of investment idea's out there but a simple Savings Bond will give them a guaranteed sum to help off set college costs down the road.

If you plan to have the used for college related costs, just make sure you use the parents social security number, not the kids. I ran into this problem with two of my kids bonds. I was paying the college costs and declaring them as a dependent on my taxes but when the kids cashed them in they had to pay taxes on them because I was paying the educational costs, not them.

This is good to know. I thought it was better to have the bonds in the kids names/soc # since it was their tuition being paid. I'm glad you clarified that as I was in a bond buying program with an old employer and have quite the sum in my name and soc#. Glad that will be to our advantage when we cash them in for the kids tuition.

[Drake3287]

I was surprised to find that tax preparers know little about the Savings Bond tax exemptions for education. Although I'm certainly not an expert on it, if the parents will most likely be paying the child's college costs AND declaring them as a tax dependent, then the tax savings goes to the parents simply because they are the ones paying the education costs.

After going through it 3 times I'm still confused by it!

[Fishindude77]

Thank you all for the feedback.

[ACarboni]

Well if it were me I'd consider opening a 529 plan but that would strictly be for college. Open it in your name with the grandbaby as the beneficiary. That way it won't be counted in any financial aid packages if its in your name. But that's just me, in my family it's just expected everyone is going to college. Oh one other thing some states give you a tax deduction for your contributions so maybe that would help you. This site has a lot of information on 529 plans,


When I was young we'd get savings bonds. I really don't know much about them anymore but Series EE can be redeemed for education and you don't have to pay taxes on the interest(if they still sell EE??). Plus savings bonds could be cashed in if you want grandbaby to use it for other things in life.

I think it's nice you're thinking about setting something aside for your new grandbaby he/she is very lucky to have you

I agree with you thrift-t on all your advice.