7 Ways Grandparents Can Help Their Grandchildren Financially


There is nothing like the love grandparents have for their grandchildren. Grandparents  love their grandchildren to the fullest, no matter what.

Because of this special relationship, Grandparents often think short term when gifting money to their grandchildren. Instead Grandparents need to plan ahead and be intentional as they strategize on helping their grandchildren financially throughout their whole life.


You can’t help your grandchildren unless you first keep yourself financially healthy. Before you make any promises about financial help for your grandchildren, take time to put together a thorough financial plan with your financial advisor. Once you have a full understanding of your financial position, have an honest conversation with your family about your decision. It’s better to offer your grandchildren less than you think you can afford than it is to offer an amount that later becomes a burden for you or your children.


Financially educated grandchildren will handle gifted funds in a much healthier way than those who are not. Start at a young age by talking about your own beliefs around money.   Share with them some of your own experiences – both good and bad. Help them make smart money choices by teaching them values on how to save money, budget and give to others. Allow them to learn from their own mistakes without fixing the problem for them.


Everything we do instructs the grandchildren in our lives – so the question is always “What am I teaching?”. If you are an entrepreneur and own your own business invite your grandchildren to join you at work. As they get older provide them opportunities to develop business, social and financial skills. Even if you don’t own a business, there are always work opportunities around your home you can offer grandchildren to allow them to earn extra money while developing their work ethic.


Academic Scholarships
Invest into your grandchildren by helping them study and complete homework. Your life experiences can provide a different learning angle for your grandkids. Don’t be intimidated by new technology or concepts. Let them turn the table by explaining a new concept to you because we all know teaching is the best way to learn.

Community Service
Invite your grandchildren to join you when you volunteer with various community service opportunities. Not only will you build great memories, but it can also yield scholarship opportunities to help pay for college.

Some scholarships are based on a grandparent’s affiliations. You can help your grandchildren find scholarships based on your affiliations by giving them a resume that summarizes all of your affiliations, including past and present employers, unions, military service, memberships, hobbies and activities, in addition to details concerning religion, race and ethnicity. Not only will you be helping your grandchildren find scholarships that match their background, but you will be giving them an opportunity to learn more about you and your family history.

Additional Scholarships
Spend time with your grandkids searching for scholarships. There are several that they may be able to apply for because of your family ties such as a Legacy Scholarship to your alma mater, Military Scholarship based on your service or an Ancestry Scholarship based on your heritage.


529 Plan
A 529 plan can be an excellent way for grandparents to contribute to a grandchild’s college education, while simultaneously paring down their own estate. Contributions to a 529 plan grow tax deferred, and withdrawals used for the beneficiary’s qualified education expenses are completely tax free at the federal level.

Under the FAFSA, grandparent-owned 529s are not counted in the formula but any distributions are counted as income in the following year. If a grandparent uses a 529 to pay a $12,000 tuition bill, the following years’ grant and subsidized loan eligibility will be reduced by $6,000. The same 50% penalty occurs if a grandparent gives money to a college-age grandchild or pays their tuition bill directly.

Grandparents can open a 529 account and name the grandchild as the beneficiary or they can contribute to an already existing 529 account. If grandparents want to open a 529 account for their grandchild, there are a few things to keep in mind. If you need to withdraw the money in the 529 account for something other than your grandchild’s college expenses–for example, for medical expenses or emergency purposes–there is a double consequence: the earnings portion of the withdrawal is subject to a 10% penalty and will be taxed at your ordinary income tax rate. Also, funds in a grandparent-owned 529 account may still be factored in when determining Medicaid eligibility, unless these funds are specifically exempted by state law.

Brokerage Account
Opening a Brokerage Account for a grandchild’s college fund has similar benefits as a 529 plan, however, the funds do not need to be applied to a college education. If your grandchild does not need to use all the funds in the account, they can easily apply the funds to a wedding or first home without tax penalties.

Grandparents can open a 529 account and name a grandchild as beneficiary (only one person can be listed as account owner, though) or they can contribute to an already existing 529 account. Grandparents can contribute a lump sum to a grandchild’s 529 account, or they can contribute smaller, regular amounts.

Giving Directly to the College
As a grandparent you also have the option to give the money directly to the college to avoid gift taxes. This is an option only if the family does not qualify for need-based financial aid because the payment will affect the student’s qualifications.

Direct Gift to the Parents and Students
If you give a financial gift to your child, it is not reported as income (taxed or untaxed) on the FAFSA. If the you give the money to your grandchild, however, it is treated as untaxed income and affects aid eligibility (by as much as 50%).

Help Pay Loans Off After Graduation
Student loans offer an important dose of financial reality for some students, but too much of a burden is crushing. Some grandparents will choose to let their grandchildren make it through the college years on their own and then help to lessen the load after the college years are complete.


When making long term financial plans for your grandchildren, consider their values, priorities and maturity. While your intent is to bless them financially, if they are not emotionally or intellectually prepared your gift can easily become a burden. Reach out to financial professionals to help determine your best options for younger grandchildren.


Your role as a grandparent is indispensable. Grandparents have an incredible influence on their grandchildren that will never leave them. Whether you live in the same town or on the other side of the country, be intentional about what you want to pass on to your grandchildren – intellectually, spiritually, emotionally and financially.

If you are able to give financial gifts to your grandchildren make sure you plan ahead. Meet with your financial advisor and estate attorney to determine the best plan for your family.

Reach out to us at Kuderer Financial if you have questions regarding your personal plans for giving financial assets to your grandchildren.