So… you are going to be a grandma or you’re already a grandma! Congrats! There’s so much to plan now! Your child is having a CHILD! What could be more exciting? You may find yourselves engaging in hours of conversations about fun things like nursery themes, baby names, and weird cravings!
Some serious topics may come up, too. Like how in the world is this child going to pay for college? Maybe you and/ or your child(ren) still have some student loans that you’re paying off? Perhaps you have JUST enough saved to begin YOUR retirement and enjoy it in the near future. Maybe your children were savvy enough to open themselves a Roth IRA when they began their careers. NOW the bridge that you and your child must cross is helping this new little human plan for paying for college. (And he or she may not even be able to read yet!)
Thing #1 That Smart Grandmas Do
They start the conversation with their child about education savings. When planning for college for your grandchild, your child needs all the help they can get. When it comes to starting a 529 plan for the child, the sooner the better. The plans offer various tax savings (on the earnings) and a variety of investments, and the more time you have, the more time there is for growth of the money. These plans are considered gifts in most cases, for tax purposes.
Thing #2 That Smart Grandmas Do
They pick a plan. Do some research and talk with a professional person who sets up these plans for families. One place to start comparing plans is here at the US News website. Make sure the plan you pick matches your objective and that you understand what the money will be expected to do over the next 18 years or so, and how it will be taxed, or not, depending on its purpose for use.
Thing #3 That Smart Grandmas Do
They help all their grandchildren. This might be a tough one if you have, let’s say an older grandchild who has stated he’s not intending to go to college, or twelve grandchildren, and no way to contribute to twelve plans yourself. It’s ok! Have the conversation with your financial pro and your children and see what they can do for you. Because of compounding interest, even a few dollars put away on a monthly or regular basis can really add up (or should I say multiply up!) Take a minute to watch this awesome video on the rule of 72 and how it works with money!
Thing #4 That Smart Grandmas Do
They know what the “qualified expenses” are for their plan, so they can relay the info to their grandchild when the time comes. The qualified expenses are the things on which the child can spend the money, such as tuition, room and board, fees, and text books. Make sure you understand what IS and what IS NOT a qualified expense before you or your child invests in a plan for your grandchild. Your financial pro will be able to give you something in writing regarding what qualifies. Laptops, bedding, and food generally do not qualify.
Thing #5 That Smart Grandmas Do
They know what the best performing 529 portfolios have been doing over the past few years. Your financial pro should be able to match you up with a fund that has been performing around 9% or 10%. Don’t go with a fund that’s been doing 6% or 1%… that’s lame. Ask your finance pro if you may see the Morningstar annualized three year return data for any portfolio into which they say you should put your money. (They should have a subscription so that you don’t have to spend money on one.)
Thing #6 That Smart Grandmas Do
They don’t forget their children while they’re at it with all this planning for the future! It’s so easy to want the best for your new grandchild and to easily forget your own child! Has your adult child set up a retirement fund? Does their company offer a matching 401K? Are they taking advantage of the full match? That’s free money. In addition, there are numerous reasons to open a Roth IRA. (But that’s a whole other blog post!) Your financial pro should be versatile enough to handle making sure your children are properly set up in these, plus any other suitable investments for their age and objectives. For example, my daughter is a self-employed entrepreneur, so a Uni-K is one of the best vehicles for her out there right now. I “hooked her up,” with one as they say!
Thing #7 That Smart Grandmas Do
They know that their plan may not show positive returns every single year. Just like mutual funds, 529 plans are invested in the market. The market goes up; the market goes down. Did you know that it’s good when the market goes down?? When the market goes down, you’re buying more shares, within your plan, for the money. Then when it comes back up, there are more shares IN the portfolio, hence more money in the account. A large percentage of portfolios do show positive returns most years, though, so no worries.
Thing #8 That Smart Grandmas Do
No one wants to have to think about this one, but they have a will, or a “Last Will and Testament,” made. Getting a will doesn’t have to be an expensive event. A lot of companies offer legal services for $25 a month or so that can put you in touch with a lawyer to create a will for you. Having a will makes it so your children and grandchildren don’t have to have the hassle of probate hearings and having the court decide where your assets go.
Thing #9 That Smart Grandmas Do
They have their children get term life insurance until their children are self-insured. Yes, yes, your child may have life insurance through their job. But guess what? I’ve heard terrible stories about people becoming terminally ill, taking a leave of absence, and somehow getting fired from their job! In the cases where this happens, the person loses their life insurance, and other benefits as well. It’s always wise to have a term policy to cover income loss and funeral expenses in the untimely event of death. Term life insurance is incredibly cheap. And necessary.
Also, whatever they do, don’t let them use life insurance as an investment. Buy term and invest the difference in mutual funds or something suitable.
Thing #10 That Smart Grandmas Do
They share articles like this! Go ahead click that share button and blast this out to all the wise grandmas in your life! This is necessary stuff that needs to be discussed and shared. I’m Heather Reliford and I work for all these things for families in Wisconsin and I have a team in Illinois and Kansas who also believes in doing what’s right for families! Thank you for your time in reading and sharing my blog post. I look forward to many more in the near future.
Wise Ladies 