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Grandparents and College Giving

As high school students get ready for college, many parents realize that they don't have enough resources to pay for an expensive college education. Grandparents are being asked more and more to help with college funding.

Most grandparents love to share their time and money with grandchildren. But during these challenging economic times, however, a strategy for giving and teaching grandchildren the value of the dollar can help set them up for financial security as well as to teach them about responsible social behaviors for success.

One Kellogg Retiree Developed a Plan for Grandchildren

Letha Lieber, who retired from our Omaha Plant in 1994, put a plan in place to send her children and grandchildren to college.


Kellogg's retiree, Letha Lieber	Granddaughter, Jennifer, graduates from college May 2008

"Letha never went to college," says her husband, Otto Lieber. "She was devoted to her children. She made a commitment to pay their tuition for an undergraduate and graduate education. But certain requirements important to Letha, including living Christian values, had to be met."

Letha's long-term financial planning helped to college-educate her two children and two grandchildren. Today, additional funds have been put into a college savings plan for her two great-grandchildren to attend college as well.

The number of grandparents who provide significant financial support for their grandkids college education is growing. A recent AIG SunAmerica Funds survey shows that more than 54 percent of respondents plan on contributing to their grandchildren's college education. Twenty-five percent of this group plan to pay between 25 percent and 30 percent of the costs and 20 percent plan to finance as much as 75 percent.

Most grandparents give generously to their grandchildren, but experts suggest that the money isn't always aimed at where it will best be used. In addition, some grandparents are concerned that some kids may not be making the most of their gifts.

Give with a purpose

Letha had several rules that had to be met before college monies were dispersed:

Children had to have a part-time job in high school and college
Children must be good citizens
Children must have a grade-point average of 3.0 or better

Giving can be fun. But by setting up requirements, the grandchildren are more appreciative because they have to work for it. It's not just another grandparent giveaway.

Give with a plan

For more information

AARP Financial Investment Counselor
1-800-218-6142 (Monday-Friday, 8 a.m. to 6 p.m. EST)

Grandparents Legacy Guide, provides tools and ideas for investment decisions for education by visiting the K.I.D.S. program at www.sunamericafunds.com.

Not all grandparents are prepared or able to help play this critical role. Many are afraid of running out of money. Many have additional medical costs that have to be paid for.

Key tips to consider when planning to help with grandkids' college costs:

Start early. Welcome the newborn with a gift towards a college education. Toys are nice, but by putting money away in an investment account allows your dollars to multiply and your investment has time to grow.
Talk to a financial advisor. Each state offers at least one 529 college savings plan. Anyone can open and contribute to the account. Find out about tax breaks in your state and watch out for hidden fees. Shop around for the plan that works best for you.
More financial aid. In addition to savings and tax breaks, you help the child's chances of getting more financial aid since the grandparent's contributions are not counted as assets.

As price tags continue to increase for investing in an education and to purchase a first home, grandparents will be asked to help pay more of the bill. By setting goals and planning early, grandchildren can learn valuable lessons early on in life.