Grandparents' Guide to Teaching Financial Literacy

Grandparents are in a unique position to help teach their grandkids about financial literacy. Here are four ways to pass your support to the next generation.

The role of grandparents has long been to comfort, support, and even spoil their grandchildren. But in a time of rising costs, particularly for education and housing, many grandparents are finding new ways to help—whether through direct financial aid, estate planning, or simply by passing on their hard-earned lessons of financial literacy.

The role grandparents play hasn't really changed over the years, but we're seeing new ways they can support their grandkids. Cash is typically the most common means of support—you can gift up to $19,000 in 2025 ($38,000 for couples) to an unlimited number of individuals without incurring a gift tax.

Of course, there are a variety of ways beyond cash gifts to provide financial support, depending on what you're looking to achieve. Generally speaking, assistance falls into four categories.

1. Education expenses

According to College Board, the average college cost for room and board for the 2024–2025 school year was roughly $30,000 at in-state public universities, $49,000 for out-of-state universities, and $63,000 at private colleges. With costs expected to rise, paying for part of a grandchild's education may be one of the best ways to support them and an area where grandparents could make a real difference.

The IRS allows you to frontload a tax-advantaged 529 college savings plan with up to five years' worth of annual exclusion gifts—or $95,000 ($190,000 for married couples) in 2025—with no gift-tax consequences. You can't make additional contributions to that specific 529 plan or other gifts to that beneficiary for the next five years without potentially incurring gift tax or affecting your lifetime exemption. However, frontloading provides you—and your grandchild—with an opportunity to have a larger amount of money that can potentially grow tax-free for longer.1

Not only that, but 529 plans can provide tax-free withdrawals for qualified education expenses, including computers, internet access, and other technology required for attendance at the school—so long as the beneficiary primarily uses them for educational purposes while enrolled in an eligible institution. Also, distributions won't be considered income for the student or factor into their federal financial aid eligibility, and many states offer residents a full or partial tax credit or deduction for contributions to their state's plan—some even allowing you to deduct contributions to any plan.

If your grandchild attends a private elementary or secondary school, funds in a 529 plan can also be used to cover up to $10,000 annually ($20,000 in 2026) in K–12 eligible expenses like tuition, online education materials, tutors, and fees for standardized tests or dual enrollment for college classes. That said, doing so will come at a cost to college savings, and not all states permit 529 plan spending on K–12 eligible expenses or follow the federal definition of qualified education expenses. Be sure to check your plan's rules, lest you be subject to state income tax, plus penalties.2

A 529 savings plan can also jumpstart your grandchild's retirement savings once they graduate and start having earned income. Leftover funds—up to a lifetime limit of $35,000—in certain situations can be rolled over into a Roth IRA (on an annual basis, the rollover amount cannot exceed the Roth contribution amounts) for the beneficiary without incurring a 10% penalty or income taxes for nonqualified withdrawals.

Learn about the Schwab 529 Savings Plan.

2. Noneducation expenses

For noneducation expenses, a custodial brokerage account can let you take advantage of the annual gift-tax exclusion while the child is still a minor. Once a child reaches the "age of termination"—typically 18 or 21, depending on the state—the money becomes theirs as an irrevocable, no-strings-attached gift that they can use for any purpose. (Ten states allow you to delay the transfer to age 25, or up to age 30 in Wyoming.)

Unlike 529s, asset appreciation in custodial accounts isn't tax-advantaged—and investment gains may be subject to the "kiddie tax": If any of the investments generate dividends or interest, or are sold for a gain while the child is a minor, for 2025 the first $1,350 of that income is exempt from tax; the next $1,350 is taxed at the child's single-filer rate; and anything beyond $2,700 is taxed at the parents' rate. Furthermore, note that income from a custodial account, in addition to the account value, can potentially reduce federal student aid.

To support older grandchildren embarking on a career or looking to buy a new home, intrafamily loans are another option. If you go this route, just make sure it's a bona fide loan and not a gift. There has to be a promissory note, a repayment schedule, and a stated interest rate.

Learn about the Schwab One® Custodial Account. 

3. Financial literacy

Direct financial gifts represent only part of the legacy grandparents can leave to younger generations. You can also give the gift of financial literacy by enlisting your grandchildren in preparing a budget, for example, or simply by talking about managing money in everyday situations. Even paying them for doing errands can be a good lesson in earning, saving, and spending.

For younger grandchildren, setting up three jars in which to place allowance and small cash gifts—one for savings, a second for giving, and a third for spending—can help instill an early awareness of how to manage money. Sometimes the old-fashioned traditions still make the most sense. However you do it, the important thing is to engage with your grandchildren in creative ways about money.

For grandchildren in their teens, financial gifts can dovetail with lessons on the market. Gifting shares in a few stocks you've chosen together and watching how they do over time can teach the value of investing while also making it fun.

For adult grandchildren, you might incentivize savings by matching their contributions to a retirement or other account. And discussing your own charitable activities can encourage them to get interested in giving.

Starting these conversations at a young age can help ensure your grandchildren grow up to become responsible money managers—not only of their own finances but also of any inheritance they might receive. By teaching them the value of money early on, you can position it not as a gift to be splurged away but as part of a legacy they can potentially build on.

Whatever a grandchild's age, make sure you talk openly with their parents to coordinate any gifts and to avoid misunderstandings. It's important for the entire family to all be on the same page.

Find more ways about teaching financial literacy to kids.

4. In-person help

Many retired grandparents relocate to be closer to their children and grandchildren—in part to help reduce costs on both sides, be it childcare for their children or travel for themselves. But being closer to family isn't just financial—forging strong relationships with your grandchildren can help them grow into happier, more secure adults.

If you're considering such a move, ask yourself how it will affect your overall retirement plans. How far will your income go in a new location? Will you have adequate access to health care? Will I pay more for taxes? These factors matter a lot more when you're living off your savings.

For instance, some states offer lower exemption amounts on estate taxes or collect income tax on certain recipients' Social Security benefits. Taxes alone aren't likely to be decisive, but such incremental costs, when taken together, can negatively affect your income plan.

Of course, relocating to a less-expensive city or state could save you money in the long run. Just be sure you're carefully considering all aspects of a move—not just the emotional ones.

A lasting bond

Creating a rapport about money with your grandchildren is beneficial for them—but could serve you well, too. As we age, we often need more help, whether with day-to-day tasks or managing our finances. Grandchildren can become wonderful, trusted advisors as adults, especially as it relates to cybersecurity and new technologies that might perplex their elders.

Indeed, building a close relationship with your grandkids, not only about money matters but also about life in general, allows you to pass on important wisdom—and even learn something from them in the process.