Wise Investment Choice for Grandchildren

Grandparents enjoy buying gifts for their grandchildren. They like taking them on trips to the zoo or overnights to the beach; but when it comes to making an investment for them there is some confusion about the best course to take. This guide discusses ways to make wise investment choices for grandchildren. There are four good paths to take, each with some individual choices that involve amounts you can afford to invest and the tax repercussions for the child later in life.

The primary goal of investment for children should be providing for college education. Next to saving for retirement the grandkids college education is probably your biggest challenge. It helps if parents and grandparents can work on these goals together, especially in financially challenged families. Two excellent plans for tax free earnings are the Coverdell Education Savings Account (here-in-after called the ESA), and the 529 plan. Roth IRA’s for children are great ways for the child to participate in the savings plans and the Uniform Gift to Minors Account allows a parent or grandparent to set up a custodial account for a child’s future.