College Savings Plan Contributions Instead Of Gifts

By Staff

Grandparents have a unique way of spoiling their grand kids. I can’t say much; my grandparents doted on me quite a bit when I was young. Now that I am a father, I can certainly understand why. But in our efforts as parents and grandparents to give our kids everything they could ever want, we are missing out on an important gift-giving option – one that will mean more to them in ten or fifteen years than any toy or video game. College savings plan contributions.

I Want My 529

College savings plans, particularly 529 plans, are becoming a popular alternative to Wii games and Barbie dolls, and for good reason. By starting early, and pooling family contributions, families just might be able to keep pace with ever increasing college tuition costs.

Since parents typically shoulder the majority of day-to-day expenses of child-rearing and saving for their own retirements, it is difficult for them to also come up with contributions to children’s college savings plans. That’s where grandparents can help. By forgoing a few wrapped presents at birthday parties and Christmas, grandparents can make contributions to their grandchildren’s college savings plans. Grandparents can also withdraw a bit from their retirement savings (yes, you can use contributions from a Roth IRA for education expenses).

Freshman Fund

Several organizations are cropping up that allow parents, friends and grandparents to contribute directly to a child’s 529 plan. One of the more promising startups is Freshman Fund, a site that allows parents to create an online profile for their children and link the 529 plans they are currently funding. Friends and families may then make direct contributions to the child’s account at, and the funds are deposited directly into the child’s linked 529 plan. This sort of “team savings” concept is a popular one on the web today.

Another benefit of this approach is that no cash has to be exchanged between grandparents and parents “earmarked” for college savings. Parents may be tempted to spend the money on something else, and grandparents may be worried about this temptation. This direct approach allows family members to contribute directly to the child’s fund without going through another family member.

Instead of piling on present after present, consider making contribution to a child’s education savings fund. The benefits of education far outweigh the effect of a toy or game, and you’ll be helping parents by taking some of the financial burden of college savings off them.