Investing for a grandson's education

By Susie Poppick, Money magazine


NEW YORK (Money magazine) -- Q: We'd like to invest $100 a month for our new grandson's education. What's the best way to do it? -- Shari J., New Orleans

A: Go with a 529 college savings plan. Your investment grows tax-free, and withdrawals are tax-free as long as the money is used for higher ed. And if your grandson doesn't need all the funds in the account, you can name another beneficiary later -- a future grandkid, say. But if you think your grandson might eventually have a shot at financial aid, his parents should open the 529, not you.

In aid formulas, parental assets are treated lightly. But distributions from a 529 in your name would be considered student income, which is heavily assessed. That would knock down his award.

Louisiana's 529 is a good one_ -- fees max out at 0.3% of assets, and the state matches contributions (2% and up, depending on your income). What's more, the plan offers age-based portfolios, which shift funds from stocks to bonds as a child approaches college.

These popular options, notes Joe Hurley of savingforcollege.com, "are good for people who like an autopilot approach that ratchets down risk."

In Louisiana you can contribute to someone else's 529. Or you can write a check to your grandson's parents.

A $100-a-month gift is well below the $13,000 annual gift-tax exclusion. While your local plan is top-notch, as a rule 529 investors should shop nationally too. Even though many states offer residents tax perks, those breaks can't always make up for high fees. See compare 529s at savingforcollege.com.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.91%-0.00%
15 yr fixed3.03%-0.00%
5/1 ARM3.45%-0.00%
30 yr refi3.97%-0.00%
15 yr refi3.12%-0.00%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 18,214.42 -10.15 -0.06%
Nasdaq 4,987.89 20.75 0.42%
S&P 500 2,110.74 -3.12 -0.15%
Treasuries 2.02 0.05 2.39%
Data as of 6:05pm ET
Company Price Change % Change
Bank of America Corp... 16.04 -0.45 -2.73%
Apple Inc 130.42 1.62 1.26%
Chesapeake Energy Co... 17.20 -0.78 -4.34%
General Electric Co 25.89 -0.02 -0.08%
Hewlett-Packard Co 34.01 -0.66 -1.90%
Data as of 4:03pm ET

Sections

Jet.com contest winner Eric Martin got 100,000 shares of the hot startup by signing up 8,000 people. More

Shu-Ling Garver, once a homeless child in Shanghai, rose to one of the top engineers at Intel. Now her entrepreneurial mission is to get kids excited about engineering. More

Glassdoor recently published its annual list of the highest-rated companies for interns. More