Jeanne Fleming, Ph.D. and Leonard Schwarz
(MONEY Magazine) -- Question: For the past seven years, I've been giving my grandson $500 on his birthday for his college education. Now I've learned that my son and daughter-in-law (who both have good jobs) never saved the money for him but instead used it for household bills. They say it's their job to see that Liam gets an education, that all their money is in one "pot" and it makes no difference whether my checks go for tuition or groceries. Can this be ethical?
Answer: No. For starters, when a gift of money comes with the stipulation that it be used for a specific purpose, it's not ethical to keep the gift and ignore the stipulation.
At the very least, your son and daughter-in-law should have asked for your blessing before spending the money.
And then there are Liam's rights. Your gift wasn't for the family "pot," it was for him. Just because he's not old enough to object when Mom and Dad use the money to pay family bills doesn't mean it's okay for them to appropriate what's rightfully his.
More than principle is at stake here. As a practical matter, lots of things could prevent Liam's parents from being able to pay for college - a divorce, a layoff or an old-fashioned poor judgment, to name but a few. However honorable their intentions, they've undermined Liam's financial security by, in effect, giving themselves a loan with his money.
We suggest you open an education savings account or a 529 plan for Liam with a mutual fund company and then, in the future, tell him each time another $500 has been safely stowed away in it. 
