Start Early: Financial Planning for Kids & Grandkids

Timing matters when building a strong financial future for the next generation of your family. Starting early can make all the difference, whether you’re a parent who wants to give your child a solid start or a grandparent eager to create a lasting, multi-generational legacy.

At iWealth, we believe financial planning for kids and grandkids goes beyond just saving for college or a first home; it’s about instilling lasting values, reducing the wealth gap, and creating financial independence that can last for decades.

But why start early? Compounding the rates of return of savings is one of the most powerful financial tools on the planet. A dollar saved for a newborn can be worth significantly more than a dollar saved for a child in high school.

Beyond the numbers, early planning can also create habits, provide structure, and allow families to align their resources with long-term, multi-generational goals.

As a parent or grandparent, planning early often makes it easier to fund college, pay for a wedding, help with a first home purchase, or support other life milestones without derailing your own goals, for example, a confident retirement for the rest of your life and that of your spouse.

In this blog, we’ll examine the top questions families ask about financial planning for their children and grandchildren and consider some alternative strategies.

How Should You Save for Your Child’s Education?

Education costs continue to rise, and many parents and grandparents ask how to prepare and avoid last-minute debt that can become a significant financial burden for children.

Various options allow tax-free growth for qualified education expenses, making them one of the most tax-efficient tools currently available.

Potential Solutions to consider:

• 529 Plans: Tax-advantaged accounts that grow tax-free when used for qualified education expenses*.
• Custodial Accounts (UGMA/UTMA): Assets are held in the child’s name and can be used for various expenses beyond education, such as a first car or home.
• Coverdell ESAs are education savings accounts with lower contribution limits, but funds can be used for both K–12 and college expenses.

Here is a table that compares the three options side-by-side:

At iWealth, we provide education tools, including resources from our iWealthTV YouTube channel, to help families teach kids about money from an early age.

*Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits, such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax-free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

Should I set up a financial trust for my children or grandchildren?

A trust can be a powerful financial tool if you’re considering larger gifts or want more control over how your child or grandchild uses the money. Unlike a custodial account, which transfers full ownership to your grandchild once they reach legal age, a trust allows you to set clear rules for how and when the funds are released.

With a trust, you can decide whether the money goes toward education, marriage, a first home, entrepreneurial goals, or even structured payouts across d

ifferent stages of life. For example, a trust is set up so your grandchild receives funds at age 25 for graduate school, at age 30 for a down payment on a home, and additional distributions for milestone events later in life.

Trusts are especially valuable if you’re considering gifting larger amounts that could exceed the 2025 annual gift tax exclusion of $18,000 per individual ($36,000 for married couples). Contributions above this threshold can still be made, but they begin to count toward your lifetime estate and gift tax exemption, which in 2025 is $13.61 million per person.

You can use a trust to incorporate gifting strategies that reduce your taxable estate while supporting the next generation of your family.

Another benefit of using a trust is that you can appoint a trustee, someone you trust to manage the funds responsibly until your grandchild is ready to take on this responsibility. This structure aims to provide confidence that the money won’t be spent too quickly or unwisely.

How much should I save for my child’s/grandchild’s future?

There isn’t a single “right” number, because every family’s goals and financial situation are unique. Some families want to cover the full cost of college, while others may wish to contribute a portion and let their child or grandchild handle the rest through scholarships, work, or loans.

Beyond education, you may also want to set aside funds to help with life milestones such as buying your first home, attending graduate school, or starting a business.

One challenge is that many people underestimate how expensive these milestones can be. For example, the average cost of in-state college tuition and fees is already over $10,000 per year in 2025, and private schools can be more than triple that. Add in housing, books, food, and other expenses; the total can feel overwhelming if you don’t start early enough.

Potential solutions to consider:

• Start with a targeted monthly contribution. Thanks to compounding, even small amounts add up over time. For example, saving $100 per month at a 6% annual return could grow to more than $38,000 over 18 years, a meaningful boost toward education or future expenses.
• Use family contributions. Instead of more toys or gifts during birthdays and holidays, ask relatives to contribute to a 529 plan, custodial account, or trust. Over time, these small gifts can create a strong foundation for your child or grandchild’s future.
• Work with a financial advisor in Minnesota. An advisor who understands your local options, from state-sponsored 529 plans to tax-smart gifting strategies, can help you decide how much to save, where to invest it, and how to adjust your plan as your personal situation changes.

Ultimately, the “right” amount isn’t about hitting a specific number from day one; it’s about starting early, contributing consistently, and making adjustments as needed.

Watch our founder, Brad Connors, discuss college planning strategies.

What if I want to help but want to invest in my retirement simultaneously?

Parents and grandparents want to give generously but worry about shortchanging their futures.

Potential solutions to consider:

• Use structured giving through accounts like 529 plans rather than large cash gifts.
• Prioritize retirement contributions first; kids can borrow for college, but you can’t borrow for retirement.
• Work with a financial planner to balance both goals.

Watch Brad talk about things to consider when balancing saving for retirement and college

How iWealth Can Help

At iWealth, we strive to provide families in Minnesota and nationwide with strategies combining practical solutions and long-term planning. Think of us as your guides in a forest of regulations and financial consequences. Our approach includes:

• Helping parents and grandparents select the right savings vehicles (529 plans, custodial accounts, trusts).
• Reviewing state-specific 529 options and comparing benefits.
• Aligning college savings with retirement planning with the goal of keeping your financial future on track.
• Providing education tools, including resources from our iWealthTV YouTube channel, to help families teach kids about money from an early age.

Ready to start planning for your kids or grandkids? Contact iWealth today to schedule an introductory consultation.

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.