A client called me not long ago to share the news that a grandchild had arrived. The joy in her voice was immediate and unmistakable. Within a few minutes, the questions started coming. What school district was the family considering? What if they needed to move to get into the right one? What could she do to help, and how should she go about it?
For the families I work with, the means are usually there. The harder work is figuring out how to give well, in a way that holds up over time and reflects what the family genuinely cares about.
A 529 Plan Is a Start, Not a Plan
My clients are not worried about student loans or financial aid applications. Instead, they are thinking about the experiences and decisions that will shape a child from birth through young adulthood: private school tuition that can begin in kindergarten, summer enrichment programs, travel, the arts, and athletics. They’re weighing what kind of environment they want for this child, and what they’re willing to do, financially and logistically, to make that happen.
These early milestones are also where family dynamics surface. Does everyone agree on private school? What happens if one grandparent wants to contribute aggressively while the parents prefer to keep things simpler? What if giving across multiple branches of the family starts to feel uneven? These tensions are worth discussing intentionally before they become difficult to talk about.
What Grandparents Can Do
Grandparents often feel a strong pull to contribute when a new grandchild arrives. The question I hear most often: Where do I start? Rather than a checklist of options, here is how I tend to think through this with clients.
The most overlooked category is enrichment. College savings get nearly all the attention, but the years between birth and college are filled with formative experiences that cost real money year after year: summer programs, tutoring, music lessons, travel, athletics.
Grandparents who fund these experiences consistently are giving something that cannot be captured on a transcript. These contributions can typically be structured as annual gifts within the IRS gift tax exclusion, meaning no gift tax consequences and no paperwork beyond good records.
One strategy many grandparents aren’t aware of is the direct payment exception. Tuition paid directly to a qualifying educational institution does not count against the annual gift tax exclusion. It is a completely separate category. For families paying private school tuition, that distinction can significantly affect how much a grandparent can contribute over time without triggering gift tax concerns.
When a client asks me what to do if the parents need to relocate to access a preferred school district, we look beyond standard cash gifts. Instead of a bank mortgage, grandparents can act as the lender through an intra-family loan. By charging the minimum interest rate required by the IRS (the Applicable Federal Rate), grandparents can help the young family secure the right home today. Over time, the grandparents can choose to use their annual gift exclusions to systematically forgive the mortgage payments, transforming a real estate hurdle into a structured wealth transfer.
Grandparents who want to put a larger sum to work early should consider superfunding a 529. The IRS allows contributions of up to five years’ worth of annual gift tax exclusions in a single year, meaning a larger amount can start compounding immediately. It requires filing a gift tax return to make the election, but no tax is typically owed. The earlier the contribution, the more time the account has to grow.
It’s also worth noting that 529 plans are far more flexible than they used to be. A common hesitation I hear from clients is the fear of overfunding, particularly when a grandchild gets a full scholarship or chooses a different path. While there are strict guardrails (the account must be open for at least 15 years, the child must eventually have earned income that matches the rollover amount, and transfers are subject to annual IRA contribution limits), this strategy effectively allows an educational safety net to become a powerful head start for their retirement.
As of July 2026, families also have access to a new federal investment vehicle called Trump Accounts. Children born between January 1, 2025, and December 31, 2028, who possess a Social Security number are eligible for a one-time $1,000 federal seed contribution. Parents, grandparents, and employers can contribute up to a combined $5,000 per year in after-tax dollars, restricted entirely to low-cost U.S. stock index funds. No withdrawals are permitted before age 18, at which point the asset converts to a traditional IRA. It is a compelling new tool, but the operational rules are still evolving and require careful review with an advisor.
The piece I find most valuable in all of this, though, is coordination. When grandparents, parents, and sometimes other relatives all want to give generously to the same child, a little alignment goes a long way. Overlapping contributions, duplicate accounts, or gifts that unintentionally affect each other can dilute the impact of everyone’s generosity. Sitting down together with an advisor who knows the family’s complete financial situation helps everyone give in a way that is both generous and intentional.
Thinking From Birth to Launch
The families I work with usually think in long timelines. They’re not only asking about this year’s camp registration or next year’s tuition, but what kind of life they want to help build for this child, and how their financial decisions today connect to that.
If your family has just welcomed a new child or grandchild, or if that moment is approaching, this is a good time to talk about what you want for that child and how your financial life can reflect those intentions.
I’d love to be part of that conversation. Call me at (317) 469-2455, email ssteel@deerfieldfa.com, or schedule a time through my online calendar. You can read what my clients have to say about working with me here.
Frequently Asked Questions About Financial Planning for a Grandchild
What is the best way to start saving for a grandchild’s future?
The best way to start saving for a grandchild’s future is to open a 529 college savings plan, one of the most common first steps and a good one. Contributions grow tax-free when used for qualifying education expenses, and many states offer a deduction for contributions. But for grandparents thinking beyond college, a fee-only financial advisor can help match the strategy to what you truly want for that child, whether that is private school, enrichment, travel, or something else entirely.
Can multiple family members contribute to the same 529 plan?
Yes, multiple family members can contribute to the same 529 plan. A 529 account has one owner, but anyone can contribute to it. When grandparents, parents, and other relatives all want to give to the same child, some coordination helps. A financial advisor can help the family organize contributions intentionally from the beginning, including direct tuition payments and multi-year gift strategies.
What happens to a 529 plan if my grandchild doesn’t go to college or gets a scholarship?
You have several excellent options. You can easily change the beneficiary to another family member (like a sibling or cousin) without penalty. Alternatively, under modern tax rules, you can roll over up to a lifetime maximum of $35,000 of unused 529 funds into a Roth IRA owned by the grandchild. This allows the money to continue growing tax-free for their retirement, though the account must have been open for at least 15 years to qualify.
What financial decisions should new parents be thinking about beyond a college savings account?
New parents should consider several financial decisions beyond a college savings account. School selection, including private school and school district choices, can influence where a family lives and when. A parent leaving the workforce to stay home has real implications for retirement savings, insurance, and long-term household income. A financial plan that accounts for all of these alongside investment questions gives families a clearer picture of what they are working with and what choices are genuinely available to them.
How should grandparents think about funding enrichment rather than just college?
Grandparents who want to fund enrichment rather than just college have several options to consider. Gifts up to the annual IRS exclusion can be made without gift tax consequences and can fund anything from summer programs to music lessons to travel. Direct payments to educational institutions for tuition are also gift-tax-free and do not count against the annual exclusion. Many grandparents find that funding experiences alongside formal education creates the relationship they were hoping for, not just a larger account balance.
