College Savings Plan Contributions Instead Of Gifts

Grandparents have a unique way of spoiling their grand kids. I can’t say much; my grandparents doted on me quite a bit when I was young. Now that I am a father, I can certainly understand why. But in our efforts as parents and grandparents to give our kids everything they could ever want, we are missing out on an important gift-giving option – one that will mean more to them in ten or fifteen years than any toy or video game. College savings plan contributions.

I Want My 529

College savings plans, particularly 529 plans, are becoming a popular alternative to Wii games and Barbie dolls, and for good reason. By starting early, and pooling family contributions, families just might be able to keep pace with ever increasing college tuition costs.

Since parents typically shoulder the majority of day-to-day expenses of child-rearing and saving for their own retirements, it is difficult for them to also come up with contributions to children’s college savings plans. That’s where grandparents can help. By forgoing a few wrapped presents at birthday parties and Christmas, grandparents can make contributions to their grandchildren’s college savings plans. Grandparents can also withdraw a bit from their retirement savings (yes, you can use contributions from a Roth IRA for education expenses).

Freshman Fund

Several organizations are cropping up that allow parents, friends and grandparents to contribute directly to a child’s 529 plan. One of the more promising startups is Freshman Fund, a site that allows parents to create an online profile for their children and link the 529 plans they are currently funding. Friends and families may then make direct contributions to the child’s account at, and the funds are deposited directly into the child’s linked 529 plan. This sort of “team savings” concept is a popular one on the web today.

Another benefit of this approach is that no cash has to be exchanged between grandparents and parents “earmarked” for college savings. Parents may be tempted to spend the money on something else, and grandparents may be worried about this temptation. This direct approach allows family members to contribute directly to the child’s fund without going through another family member.

Instead of piling on present after present, consider making contribution to a child’s education savings fund. The benefits of education far outweigh the effect of a toy or game, and you’ll be helping parents by taking some of the financial burden of college savings off them.


  1. My mother set up a savings account for my daughter (that she won’t know about until she graduates high school) and has bought savings bonds for her as well. This way she can give quietly without my daughter knowing she’s receiving money.

    My mother-in-law, well, you know that story…

  2. i completely agree and i have a few relatives that see the benefit of this and who do contribute to our 529s. unfortunately i had one grandparent who said they wouldn’t contribute because our kids “may not even go to college”. my husband and i have three degrees between us; i’m pretty sure my kids will at least make the attempt to go.

  3. Our grandparents buy a $50 savings bond for each child’ birthday in our family. I can’t wait to give those to them when they get older. Sooo much better than the latest electronic gadget!

  4. I have tried unsuccessfully to get my parents and inlaws to contribute to my kids 529’s. But because they don’t grasp the opportunity of the vehicle, they don’t contribute. Instead, I have a house full of toys. 🙁

  5. Great post – I wish my parents/grandparents had done this for me! Of course, when kids are little, you get more of an instant response from giving a toy but an education is something they will appreciate their whole lives.

  6. Thanks for the reminder. I set up a 529 plan in March for our baby (due this week) and never put any money into it. Yikes, time to get started on that one! The intention was always for grandparents and great grandparents to be able to put money into it as well.

  7. I wish that my sister would set something like this up for my nieces and nephew. We don’t have any kids and I would gladly contribute to theirs.

  8. I knew I was not the only person who wanted grandparents and well meaning friends to stop buying my almost one year old stuff that he will not play with and put it in is 529 plan. I have my parents convinced, my inlaws that is different story. They did buy him a 125 dollar vermont teddy bear though.

  9. I know you are helping the kid and I would have loved to have some of these when I was starting college but how do you sell the kid on them? I assume most kids want toys and will have no idea what these are, thus not really being thrilled about it when he/she receives.

  10. @Luke: In practice, you’d probably have to give the kid something small – a book, a small toy, etc. and then let the parents know you contributed to their 529 plan rather than going all out on toys. Seems to be the best of both worlds.

  11. I started an account for each of the grandkids when they were born. Now for birthdays and Christmas, they get a ‘token’ small (usually educational gift (from a garage sale find) (they are all under 8) and are told that there is also money going into their college acct.

    As they know that Grammi is ‘poor’, they have been told that they will also have to save their money for college, etc – so they are not thinking that this fund will be all they will need – but it will help a little.

  12. We do this in our family for our daughter and a nephew. We’ve talked about it among our siblings & cousins, so aunties & uncles know that’s our preference. Anyone who prefers to get them a toy or other gift is welcome to do that instead. Grandparents also get to choose. We don’t expect everyone to want to give in the same way, and in reality we usually end up with a nice mixture of things for the kids to play with and money for their 529s. It also reflects the nature of our extended family, in-laws and out-laws :), in that we cross the spectrum of preparing for tomorrow and enjoying everything today. No one’s feelings are hurt, everyone’s contribution is appreciated, and the kids are left neither overwhelmed nor underwhelmed with tangible gifts.

  13. I wouldn’t say it’s necessary to give them something along with a 529 contribution. I’ve had relatives who only put money into investments for my son, and they just told him about it in a card. They didn’t compensate by giving him something small either. What they gave him was the idea that money is something that can be saved (and invested). This is quite opposite from everything my son learned from my family (including me until relatively recently). Yes, I know this isn’t in line with most things these days (instant gratification), but its a powerful learning experience. My son’s the only grandchild in our family who saves his money. He did not learn this from me, and I can only assume its either in his genes or he learned it by example from my ex’s relatives. 🙂 The only part I can claim any pat-on-the-backs for is not voicing my own disapproval of their lack of gift-giving (it was totally foreign to me, to say the least — I’ve only relatively recently learned the value of saving money myself). I knew what they were doing was nice, though, so I told my son that it was and how much he’d appreciate it later when he got older. I’m glad I bit my tongue, because he’s 18 now, and it was one of the best lessons he (and I) ever learned.

  14. Great idea. My kids really don’t need more toys from their grandparents that they might play with for a week. The price of the gift growing in a 529 would be much better.

    We have 529’s et up for our kids. Every now and then my daughter asks how much is in hers and she gets excited every time!

  15. I am very grateful that twice each year (her birthday/Christmas) my parents contribute the maximum ($2,000/year)to an Educational IRA for my daugther. Just curious, does anyone know the difference between this and the 529–the 529 definitely seems more popular.

  16. I always contribute to my nephews 529 plan. He has plenty of toys. I purposefully give the money to him, so he knows he got a good gift. Though, he isn’t always pumped when he learns he has to give it to his mom to be deposited.

  17. In 2005 I opened a 529 with my son’s 99,000.00 inheritance.We recently learned after 3 yrs. it had lost all the profit and was down $9000 from the start of the investment.YIKES! He has less then 2 yrs.until college. I’m so worried. Good Luck!

  18. We are opening a college savings account for my 11 month old and are trying to figure out a polite way to request the guests attending her birthday party to contribute to the account instead of buying toys. Does anyone have a idea of how to do this without offending the guests?

  19. Lots of confusion on how these plans work here…

    An Aunt, Uncle, Brother or Sister, Grandma or Grandpa can open a 529 for a child (beneficiary). If the beneficiary decides not to attend college, you as the owner, can go down/up the family tree to the next generation (or back to you) or across the tree to siblings or cousins. If your beneficiary decides not to attend, then there are some fantastic golf schools in Tempe, AZ, and even the Culinary Institute of America that will allow you to use your 529 funds tax free.

    A polite way to ask for 529 contributions is to slip the account details into the baby shower invitation and request a contribution in lieu of gifts. You would list your registry, why not list your 529 registry? Another way, is to provide a list to your financial adviser and have him/her reach out by mail to folks you would like to ask, but are too shy to ask yourself.

    For the folks using savings accounts…the cost of college is skyrocketing and to hope you’ll have enough savings bonds to pay for 4+ years of school will require a tremendous amount of savings. If you remember the rule of 72 (72 divided by your interest rate is how long, in years, it will take to double your money), then savings at 2% will take 36 years, versus a 529 at 8%, taking 9 years.

    Please monitor your 529 and be sure you are in appropriate investments for the child’s age. The closer to college, the less risk you can afford to take.