A Grand(parent) Gesture: Gift of College Savings

By Teresa Stewart - September 7, 2017

Grandma and Grandpa, Mimi and Papa or Nonna and Nonno—no matter the name they call you, grandchildren evoke sentiments of joy and love for grandparents everywhere. In celebration of Grandparents Day on Sept. 10, we're highlighting what one Kansas couple has done for their grandkids' college savings. Chris Fogliasso tells us why she and her husband, Dick, believe saving for their grandchildren's higher education is so important and how 529 Plans have helped.

What made you consider 529 contributions as a gift?

At Christmastime in 2015, my husband and I noticed what a tremendous number of toys our grandson had. And of course, like typical grandparents, we were major contributors to that number! But after the holidays, my husband and I had a serious talk about the fact we would really like to give gifts that would have more long-term effects.

When did you start gifting your grandchildren with 529 contributions?

My husband and I started making 529 contributions in 2016. At the time, our grandson was two years old and our granddaughter was one. For us, it made sense to contribute to my daughter and son-in-law's existing account versus opening one under our name. We expect that will have less of an impact on the kids' potential for financial aid in the future.1

Why did you start so early?

Because we realize the potential power that years in the market can have—the longer the period, the better. By giving this money time to grow and benefit from tax-free earnings, it can help boost the effect our contributions will have in our grandkids' lives.2

For what occasions do you give 529 contributions to your grandkids?

So far, we've made 529 contributions for birthdays, Christmas and baptisms. We plan to continue to make contributions to their 529 accounts for all gift-giving occasions in the future. Because we can make contributions for as low as $25, we anticipate contributing for preschool graduations, sports events and dance recitals. If it's a reason for a gift, it's a reason for a 529 contribution!

Did you find the process of contributing to your grandkids' 529 accounts to be easy?

Absolutely! We do it online, and it only takes a few minutes. My daughter, as the account owner, just sent me a Ugift code  that I can use anytime I want to transfer money securely.

Why is college savings important to you?

Both my husband and I have advanced college degrees, as do each of our children. Those degrees have been blessings and tickets to careers that are truly fulfilling—both financially and personally. We want to help our grandchildren have those same opportunities, and we would like to help their parents make that happen by helping fund the grandkids' college educations.

Did you have a college savings account for your own children?

No, and I certainly wish we would have if they had been around. We paid for our children's college expenses on a more or less on a "pay as you go" basis, rather than by having a specific college savings account already established. I still remember the difficulty of trying to find the necessary funds that we needed each month when our children were in college. On top of the benefits for our grandchildren, it's great that our children will not have to go through similar experiences.

Why is it important to you as a grandparent? What changed?

One thing that has changed is what my husband and I learned from our challenging experiences in paying for our own kids' college education. I now see how helpful it would have been if we had regularly and automatically saved for our kids' college over a period of years—starting when they were young.

What's your ultimate goal from contributing to the accounts?

I realize that our contributions to the grandkids' 529 accounts won't totally fund their college education—not by a long shot. However, we decided that any contributions we make will be helpful when that time comes. My husband and I have a deep sense of satisfaction in knowing that the money we deposit into their 529 Plans is pursuing that goal.

What would you say to people who haven't yet started a 529 account?

First of all, it's not too late. No matter what age your kids or grandkids are, do it—today. Also, at first my husband and I were a bit hesitant to make 529 contributions because we knew that we wouldn't be able to make the size of contribution that, we felt, would make a huge difference. But we now realize that little by little, the contributions add up. Whether I'm around to see it or not, it makes me feel great to know that someday my grandkids will be attending college with help from Nonna and Nonno.

Teresa Stewart
Teresa Stewart

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      1 529 Plan assets can impact financial aid eligibility. For 529 Plans owned by grandparents or others, withdrawals used to pay college expenses will be counted as student income on the following year’s Free Application for Federal Student Aid (FAFSA). Learn more.

      2 Earnings grow free of federal and state income taxes while in the account. No income tax is paid on the growth of your account when withdrawals are used for 529 qualified expenses. Contributions may qualify for state tax deduction where applicable.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.