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Did you know that according to a Pew Research Center, Multigenerational Households: A Growing Trend study, nearly 70% of grandparents provide financial support to their grandchildren? (1) While showering them with love and cookies is essential, many grandparents also want to help set their grandkids up for financial success. 

In reality, young adults today face a tougher financial landscape than previous generations. Student loan debt is at an all-time high, and the cost of living continues to rise. By taking proactive steps to save for their future, grandparents can play a crucial role in closing the wealth gap and empowering their grandchildren to achieve their financial goals. 

Let’s explore various tax-advantaged savings options and strategies to help you grow your contributions to your beloved grandchildren. We’ll delve into custodial accounts, 529 plans, savings bonds, certificates of deposit, and even youth savings accounts.  

Grow Your Gift with Time: Why Starting Early Matters 

What is the best thing you can do for your grandchild’s future savings? Start early! Even small amounts can become a big surprise thanks to compound interest. 

Think of it like a snowball rolling downhill. It starts small, but the longer it rolls, the bigger it gets. Compound interest works the same way. The money you save earns interest, and that interest itself earns even more! 

  • Here’s a quick hypothetical example: Let’s say you save $50 a month consistently for your grandchild from birth, starting with an initial investment of $0. Assuming a hypothetical annual interest rate of 7% compounded annually, this could grow to around $91,347.13 by their 18th birthday. It’s important to note that a 7% interest rate is a fairly high assumption, and actual returns may vary depending on the investment chosen. However, this example still demonstrates the power of compound interest over time, even with smaller contributions. 

Why Start Early? Big Benefits! 

The sooner you start, the more time your money has to potentially grow. Even small amounts early on can be worth much more than larger sums saved later. 

More Time, More Options: 

Starting early gives you more breathing room. You can adjust your savings based on your budget, and with a longer timeframe, you can even explore investment options that might grow your money faster (but come with a bit more risk). 

Confidence for Everyone 

Knowing you’ve helped secure your grandchild’s future can be a great feeling. It lets them focus on their dreams with more confidence and less financial stress. 

By starting early, you can turn your gift into a powerful financial boost for your grandchild’s future. 

  • Custodial Accounts: These accounts allow you to manage the money until your grandchild reaches adulthood, at which point they take full control. 
  • 529 Plans: 529 plans are designed specifically for education savings. Contributions typically grow tax-free when used for qualified education expenses. Some states even offer tax breaks for contributions. 
  • Series I or EE Savings Bonds: Series I savings bonds offer a competitive interest rate that adjusts for inflation. EE savings bonds offer a fixed interest rate. Both options are backed by the U.S. government. 
  • Certificates of Deposit (CDs): CDs offer a guaranteed interest rate for a fixed term. They are a safe option for growing your savings, but early withdrawal penalties may apply. 

Even Youth Savings Accounts Can Help 

Opening a youth savings account in your grandchild’s name can be a great way to teach them the importance of saving money. They can start small with birthday money or allowance and watch their savings grow over time. 

The Importance of Planning for the Future 

By taking steps to save for your grandchildren’s future, you are giving them a valuable gift. You are helping them achieve their financial goals and set them on the path to a secure future. 

We explored a starting point for grandparents who want to help their grandchildren save for the future, however, each situation is unique and requires a costume strategy. If you want to explore options to give your grandchildren a head start, let’s schedule a free consultation to discuss the best options for your circumstances. 


  1. (1) D’Vera Cohn, J. M. H. (2022b, March 24). 1. the demographics of multigenerational households. Pew Research Center. 

    (2) Bennett, R. (2023, August 10). Saving money for your grandchildren: Best ways to get started now. Bankrate. 


Diversification does not guarantee profit nor is it guaranteed to protect assets. Investing involves risk, including possible loss of principal. No investment strategy can ensure financial success or protect against losses. This information is being provided only as a general source of information and is not intended to be the primary basis for investment decisions. It should not be construed as advice designed to meet the particular needs of an individual situation. Please seek the guidance of a financial professional regarding your particular financial concerns. Consult with your tax advisor or attorney regarding specific tax issues. 

Pinnacle Financial

The Pinnacle team’s primary objective is to provide holistic financial strategies. Our ultimate vision is to educate clients about their own personal financial challenges and potential solutions regarding complex financial issues.

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