06/06/2026
"Warm-Up" Brainbuster question: "If I was going to start putting money away for grandkids, where could I put it and why?"
My answer would depend on what you want the money to do and how much control you want to maintain.
A combination approach might be the best solution:
1. Birthday/Christmas money into a Roth IRA (once they have earned income) - contributions grow tax-free, future withdrawals can be tax-free, decades of compounding can create extraordinary results, and contributions (not earnings) can often be accessed later if needed.
2. Monthly gifts into a 529 Plan - tax-deferred growth, tax-free withdrawals for qualified education expenses, can be used for college, trade schools, apprenticeships, and certain K-12 expenses, and recent rule changes allow some unused funds to be rolled into a Roth IRA for the beneficiary (subject to limitations and requirements).
A potential downside is that you are earmarking (restricting) the money for education-related purposes.
3. Additional long-term wealth building into a low-cost index fund in a custodial account - here you have no restrictions on education or retirement and the money can be used for a first home, business startup, wedding, or other opportunities.
A potential downside to consider is that the child gains legal control of the account at the age of majority (typically 18 or 21, depending on state law). Some grandparents love that; others don't.
4. Small participating whole life policy, if preserving future insurability is important to the family - this is usually the most misunderstood option.
It can make sense when the child is very young and healthy, when you want to lock in insurability, when you have already addressed college savings, retirement savings, and emergency reserves, and when you're interested in long-term cash value accumulation and asset diversification.
It usually doesn't make sense if the sole objective is investment growth - since there are generally more efficient ways available to accomplish that.
The biggest lesson here isn't necessarily where the money goes, it's helping the kids learn that every dollar has a job: some dollars are for learning, some for opportunities, and some for future freedom. A child who understands that principle is often far wealthier than one who simply inherits money. 🥰
