Investment advice for a new granddad?

[HarryHawk]

Happy to say I got the best Christmas present - our first grandchild, a beautiful little girl.

Anybody have any investment advice that has worked out well for getting a granddaughter off to a good financial start?

I purchased a 529 type investment for my son when he was born, it worked out well. Of course that was 35 years ago.

If it makes any difference, son and daughter-in-law are both M.D's, so they make a healthy income.

My grandparents and parents were not rich, probably closer to being on the poor side of the curve. They all made sacrifices which made my life so much easier. I hope to pass it along to do something to make a difference for my granddaughter.

thanks for any words of wisdom, knowledge and experience.

 

[Dash man]

Congratulations!
I’ve opened 529 plans and custodial brokerage accounts for each of my three grandkids. My plan for the 529 accounts is to have enough to cover for Penn State main campus. Any more is on them. Any less can be used for graduate school or their kids.
I’m not as generous with the custodial accounts, though a little nest egg for a car or just to get them started in investing or other life endeavors will be appreciated I’m sure. They are three and four years old, so a long time to grow.

 

[cathy63]

Congrats! I agree that a 529 is a wonderful gift to your new granddaughter.

Be careful with a custodial account. Earnings from that account will be subject to the "Kiddie Tax" and have to be reported on her parents' return.

 

[all4j]

Congratulations -- nothing quite like it!

Probably not what you came looking for, but 1st advice I'd give is that the most important thing you'll spend on/for/with her is time. No substitutions for that in my experience. Following that, I'd keep some $ in her budget for experiences.

To the extent possible, I'd also suggest it is quite helpful for parents & grands to be on the same page (including both sets of grandparents). By that I mean $ spent shouldn't be a competition or source of conflict.

Have fun!!!

 

[Dash man]

Congrats! I agree that a 529 is a wonderful gift to your new granddaughter.

Be careful with a custodial account. Earnings from that account will be subject to the "Kiddie Tax" and have to be reported on her parents' return.

Taxes for custodial accounts don’t have to be filed if under $2,200. If investing in growth stocks or funds, dividends can easily be kept under that amount. Selling individual stocks once a year, then buying it back or changing to another stock can keep capital gains minimized.

 

[Katiek]

I don't have children, but my parents were very involved in the upbringing of their grandchildren. They started 529's for them, but it sounds like the parents will be well able to cover college. As others have mentioned, though, the things that the grandkids seem to have gained from them the most are the memories and lessons taught during the time they spent together doing every day things. Trips to museums, parks, special art exhibits. Time spent teaching them to read or sharing favorite books and movies.



Even financial lessons got picked up by watching and short conversations rather than big gestures. But you could talk to the parents about the best way to structure gifts over the years so that some portion of it gets accrued for the child to use for school or for a head start on investing when they graduate.



Congratulations on this wonderful addition to your family

 

[athena53]

Do a lot of research on 529s. Some, not all, have ETF options which will save big bucks in fees over the long run. You may need to choose one based in your state so that you can get a tax break on part of your contributions. I'm maxing out on my state one ($8K/year) and will be starting some at Fidelity that have no tax breaks for my state but offer ETFs.

all4j had an interesting point about the other grandparents. My DDIL's parents are good people, of modest means, and we share very similar values- hard work, education, reading to kids from Day One. They take the kids to the State Fair (pre-COVID) and for trips in their camper. DDIL's side buys lots of toys, some educational, some Disney Princess stuff. I'm not into Stuff but I take them for haircuts at a fun place, pick up the tab at the occasional nice restaurant, etc. I get a local hotel room and take the 2 older girls overnight, so they can use the pool. They love it.

We honestly complement each other.

 

[Koolau]

We've been helping the grandkids' parents (our kids). Mostly, we've been funding their Roth IRAs. At some point, we may look at 529's but IIRC they count 100% for FAFSA. Others more knowledgeable feel free to comment as YMMV.

 

[eytonxav]

Happy to say I got the best Christmas present - our first grandchild, a beautiful little girl.

Anybody have any investment advice that has worked out well for getting a granddaughter off to a good financial start?

I purchased a 529 type investment for my son when he was born, it worked out well. Of course that was 35 years ago.

If it makes any difference, son and daughter-in-law are both M.D's, so they make a healthy income.

My grandparents and parents were not rich, probably closer to being on the poor side of the curve. They all made sacrifices which made my life so much easier. I hope to pass it along to do something to make a difference for my granddaughter.

thanks for any words of wisdom, knowledge and experience.

+1 Congrats, you beat me to it as our first grandchild was born on 12/27/21, also girl, and have been thinking about what to do regarding a 529 plan or something else. I will certainly discuss with DS/DDIL as to their wishes and no we do not want to get into oneupmanship with our in-laws so that is certainly something to discuss. While my son and daughter in-law both have good jobs, they do not have Dr salaries and will probably be looking to move into a larger house in the next few years. I had been under the impression that one can pick and choose investments in a 529 plan, but this does not appear to be the case, except for some pre-selected options. Since we are in Texas, no need to consider state tax impact, but low investment costs and decent etf/funds are important. I do not think one is restricted from choosing another states plans. If anyone has any guidance in this area, I too would appreciate your wisdom.

 

[athena53]

We've been helping the grandkids' parents (our kids). Mostly, we've been funding their Roth IRAs. At some point, we may look at 529's but IIRC they count 100% for FAFSA. Others more knowledgeable feel free to comment as YMMV.

Right now 529s owned by grandparents are not counted towards FAFSA. Here's one link. Things can change over our time horizon, of course. My oldest grandchild is only 7.

https://www.forbes.com/sites/robert...-a-boost-from-new-fafsa-form/?sh=7cc87e613acb

 

[Dash man]

+1 Congrats, you beat me to it as our first grandchild was born on 12/27/21, also girl, and have been thinking about what to do regarding a 529 plan or something else. I will certainly discuss with DS/DDIL as to their wishes and no we do not want to get into oneupmanship with our in-laws so that is certainly something to discuss. While my son and daughter in-law both have good jobs, they do not have Dr salaries and will probably be looking to move into a larger house in the next few years. I had been under the impression that one can pick and choose investments in a 529 plan, but this does not appear to be the case, except for some pre-selected options. Since we are in Texas, no need to consider state tax impact, but low investment costs and decent etf/funds are important. I do not think one is restricted from choosing another states plans. If anyone has any guidance in this area, I too would appreciate your wisdom.

We have our grandkids 529 plans split between Pennsylvania and Utah plans. They are both very low cost Vanguard funds with choices of target date funds or fund choices like aggressive, moderate, total stock market, etc. We’re very happy with both.

 

[brett]

We opened edu programs for each of our three grandchildren when they were born. We contribute annually to these tax sheltered programs and obtain the Gov't 20 percent matching dollars in our jurisdiction.

When we updated our wills we made a provision for each of our grandchildren for an amount to be taken off the top of our estate. Each grandchild's will have a separate edu trust fund. The amount of these funds will be revisited when we redo our wills given that the existing edu funds continue to grow. Long time to go as the oldest grandchild is only 7 years of age.

Our goal is to ensure that we provide each grandchild with something that will benefit and enhance their lives going forward. It will be up to them as to if or how they avail themselves of it.

Only one of our two children is married with children at this point. They have both bought into this program even though it may appear to favor the married w/family child more that our unmarried son at the moment.

 

[eytonxav]

We have our grandkids 529 plans split between Pennsylvania and Utah plans. They are both very low cost Vanguard funds with choices of target date funds or fund choices like aggressive, moderate, total stock market, etc. We’re very happy with both.

Did you opt for the target date vs other fund choices?

 

[Dash man]

Did you opt for the target date vs other fund choices?

I did have target date until Jan 1 when I switched to a total market stock fund. The older they get they gradually add more fixed income and reduce equities. With bonds like to not be very good performers for a few years, I moved to all equities. Changes can be made twice per calendar year, so if things change I can adjust. They’re young, so all equities is good for now.

 

[eytonxav]

I did have target date until Jan 1 when I switched to a total market stock fund. The older they get they gradually add more fixed income and reduce equities. With bonds like to not be very good performers for a few years, I moved to all equities. Changes can be made twice per calendar year, so if things change I can adjust. They’re young, so all equities is good for now.

Good point, wasn't sure if one could adjust going forward.