Here’s How You Can Save for Your Grandchildren?

Jun 27, 2018 | 9 months ago | Read Time: 3 minutes | By iKnowledge Team

A cheque or cash slipped into a birthday card is usually a welcome gift from a grandparent. But there are ways for you to make real savings and investments for your grandchildren. You must look for options that can have a more lasting effect on their financial independence. You can show your affection by offering strategies to reduce their future financial burdens, optimising returns and offering safety of capital. Here are a few ways you can do this.

Open a Savings Bank Account

Regular input of small amounts in the name of your grandchildren may grow and give good returns by the time they come around to using it. A savings bank account provides a fairly decent rate of interest  up to 4% that can help your money grow, especially if it is a long term plan.

Set up a trust

Trusts are a common way for grandparents to pass wealth on to heirs. A custodian controls the assets until the age of majority, which is 18, 21 or 25, depending on the state and type of transfer, although grandparents can specify an older age. These assets can reduce how much college financial aid grandchildren qualify for.

Pay for schooling directly

You, as a grandparent, may want to pay for your grandchild’s private school or college education. You can either choose to do so directly or through their parents. Paying tuition fee directly has the advantage of not being subject to gift taxes. But the payments could lead to a reduction in college financial aid. When the time comes, it’s better to quietly write a cheque to the parents around tuition time.

Start SIPs

Systematic Investment Plans (SIPs) are one of the best ways you can save for your children or grandchildren. Even minimal amounts can grow to a significant figure that can aid your grandchildren when their financial need arises. If you have goals like your grandkid’s marriage or education, then SIPs come in handy. Regular investments in equities can help you grow a lump sum figure by the time you actually need it. You may start with equities and then gradually move on to debt investments. Like most investments, you can do this at the click of a few buttons sitting at home.

Purchase Stocks in Their Names

Buying stocks of blue-chip companies for your grandchildren now and letting them grow will increase their value over time and also earn you regular dividends. If you want to reduce the financial burden like an education or home loan or even the purchase of real estate on your children and grandchildren, you can purchase stocks in their name. Stocks have the prospect for capital appreciation and may give steady dividends. Since minors, and in this case, your grandchildren, cannot own stocks in their own name, you can purchase stocks on their behalf so they reap the benefits at a later stage. At a future date, when the need arises for them to seek funds, they could use the resources available from the stocks at the market rate and obtain the money.

Get Them Insured

If for some reason, your grandchildren are financially dependent on you, you will need term insurance to ensure they’re protected in your absence. You might want to consider buying permanent life insurance as a way to pass money to them tax-free. The iTerm plan from AegonLife offers a life cover of 100 years. If you put your grandchildren as nominees, they would get the sum assured in the event of your demise. You can also get additional covers against accidents.

Buy Health Insurance

Statistics say that around 1,800 children are being diagnosed with terminal diseases and around half of them don’t have the funds to get a cure. Medical costs are on the rise and their fall is a far-fetched dream. Buying a health cover for your grandchildren is possibly the best thing since medical treatments are expensive and it reduces their financial burden considerably.

Conclusion

Giving cheques, cash, little treats and goodies are welcome gifts to grandchildren. But if you are looking to make a lasting effect, consider the above options provided on savings and investments for their future financial independence. Regardless of the options you choose, it is also a good idea to teach your grandchildren how to use money responsibly at an early stage.

Advt. no.: IA/Jun 2018/4146


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