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Intro to College Savings - Lesson 4
Get family and friends involved
Grandparents are the second-biggest source of college savings (next to parents). When polled about their financial objectives, the desire to help fund the college education of their grandchildren consistently comes out on top. Other relatives and friends can also be impossible sources of college savings, although for purposes of today’s lesson we will include them in the term “grandparents.”
The question as it relates to grandparents is: what is the best way to get them involved tin your child’s college savings?
Many parents are understandably reluctant to ask the grandparents for financial assistance. After all, the responsibility for educating their children usually lies squarely on the parents’ shoulders.
Yet most grandparents, if asked, will respond positively. If you feel your child’s grandparents are financially capable and would be receptive to an invitation to join the college savings effort, you might approach them by first describing your own steps in setting up a college savings fund.
If your child’s grandparents are utilizing the services of a financial planner, you could ask whether or not the planner has discussed the possibility of helping to fund college. As the parent, it would be important for you to know what to expect so you can coordinate your own college savings efforts.
Not all of the college savings vehicles discussed in Tuesday’s lesson are appropriate for grandparents. For example, grandparents cannot take advantage of the education tax exclusion with U.S. savings bonds when the student is not their tax dependent. Also, most Coverdell education savings accounts require that a parent or guardian be named as the “responsible individual,” leaving grandparents out.
But 529 plans and UTMA/UGMA accounts are still available to grandparents and 529 plans, in particular, offer special features that many grandparents will find especially attractive.