Grandparents want to help their grandchildren in a variety of financial ways, the most common of which is to help with college expenses. A survey sponsored by Legg Mason and its 529 Plan, in partnership with GRAND Magazine, found that this generation of Grandparents is trying to “pitch-in” with financial and even non-financial assistance to make things easier for their family. When asked what the most important reason was for doing this, 47 percent replied that their grandchildren need it and they have the financial means to provide some level of assistance.
With tuition costs increasing at a rate that outpaces inflation, students can use any assistance possible. Grandparents may not be the main source of support but they can still be an important source. Over two-thirds of those surveyed with college-bound grandchildren are currently saving or planning to save for their Grandchildren’s future educational needs. Among this group, 40% are planning to use 529s — a figure that has clearly grown from the 10% who used 529 Plans to pay for their own children’s college expenses. Yet there are still many who are using current income or drawing from savings and investing accounts to pitch in – a move that could ultimately put their retirement savings in jeopardy in the long-term.
When asked why they don’t make greater use of 529 Plans, the most common reason cited is concern over the impact these amounts will have on their Grandchild’s student aid eligibility. There is a very easy strategy to get around this issue. Contribute the full 529 Plan amount towards your grandchild’s final year of college, which is after student aid eligibility has been determined. And make sure you talk to your own children about how you would like to help the grandkids early in the budget planning process.
For more information on starting a 529 Plan for your Grandchildren, go to:
www.scholars-choice.com/grandparents
All investing involves risk, including possible loss of principal.
Legg Mason, Inc. is not affiliated with GRAND Magazine.
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