These unexpected money moves can make giving your grandkids financial help more fun

By Robert Powell

Beyond the 529: There are many creative ways to give your family a leg up

There are a lot of ways to share financial values with your family.

Tried-and-true strategies to help your grandchildren financially - like 529 college-savings plans or even custodial Roth IRAs - still deserve a place in every grandparent's playbook. They're classics for a reason. But there are also less conventional, more creative ways to give your grandchildren - and even your adult children - a financial leg up.

In this second installment of my two-part series, I'll share the unexpected advice financial planners offered me as I think about how best to set up my soon-to-arrive grandchild for long-term success.

Part 1: I'm about to become a grandparent. How can I set my grandkid up for financial success?

Grandparents are uniquely positioned to pass down values along with dollars. Whether it's using a donor-advised fund (DAF) to spark family conversations about generosity, rewarding a child for reading, or simply sharing stories about financial successes and mistakes, the habits and values modeled by grandparents can be just as impactful as the money itself.

Don't give what you can't afford

Mitchell Kraus, a certified financial planner with Capital Intelligence Associates warned against going "out of your way to set up your grandchildren if you are struggling with your own finances."

You don't want a generous gift to jeopardize your financial security.

Read: 'Where are we vulnerable?' My husband and I are in our 50s. Our $450K mortgage is paid off. We have $500K in IRAs.

Think beyond college

"If you have the financial resources to help supplement or fully pay for preschool, elementary, middle and high school, I can't think of a better way to be impactful with your grandkids," Brett Anderson, a certified financial planner with St. Croix Advisors, said.

Teach hands-on lessons about money

You can pay grandchildren for reading, with the parent supervising the enterprise.

"I'm now paying my 7-year-old grandson $1 for every book he reads," said Glenn Downing, a certified financial planner with CameronDowning. "His mother, my daughter, keeps a spreadsheet and is the arbiter of whether the book counts. He loves receiving a little cash in the mail from time to time. Soon enough he'll connect the dots between education and earning."

Everyday moments can teach children about the consequences of their decisions.

"As a parent of a 3-year-old and a 6-month-old, I'd been consistent about demonstrating the concept of trading," said Cody Ward, a certified financial planner with Leeway Planning. "The little ones learned that trade-offs are everywhere, and this is as foundational as it gets in my book."

Picture being at a restaurant with a fresh activity kids' menu and set of crayons. "When the little one wants to use blue instead of red, that's an opportunity to show that a trade must be made," Ward said.

While we make investment decisions only a few times a year, most of us make money decisions every day, said Sean Pearson, a certified financial planner with Ameriprise Financial Services.

He recommended integrating financial lessons into daily life rather than waiting for formal teaching moments. "Rather than a noise-making toy for a toddler, maybe bring a bedtime board book about saving or spending," Pearson said. "You can ask the preschoolers if they would prefer this $5 ice cream or a similarly priced toy."

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Use stock ownership as a teaching tool

Try opening a small brokerage account for your grandchild.

"As the child ages, use it to teach them about owning companies," said Ralph Bender, a certified financial planner with Enduring Wealth Advisors. "Maybe buy shares of a company that is significant at their age: baby products at birth, toys as youth, or stick with one company you think they'll appreciate when they're old enough to start understanding. As they age, make it an annual conversation to select their stock for the year."

As they get older you can teach them about researching companies and about investing in index funds.

Check out MarketWatch's Virtual Stock Exchange game

There are at least two ways of setting up an account to help a grandchild start investing. Grandparents could, for instance, go about this by gifting money to the minor using either a UTMA or UGMA (Uniform Transfer/Gift to Minors Act - depending on the jurisdiction).

Once money is in a UTMA or UGMA account, it is the legal property of the minor. When the child reaches the age of majority in their state, the custodian is removed from the account; the young adult now has full ownership outright and without restriction. Hopefully, by the time they reach the age of majority they've learned about stock-price appreciation and can continue investing.

If there is a chance the family will want to use the funds in the future or they have concerns about the young adult having ownership of this money, the assets should be held in an account registered to an adult.

Taxes also should be considered, said Bender. "The tax ID assigned to the account is responsible for any realized capital gains or taxable dividends and interest," he noted. "In the UTMA/UGMA plans, that's the minor. Otherwise it's the adult."

Read: My RMD starts next year. Should I convert my whole IRA to a Roth?

Use stories and traditions

Try this alternative to formal financial education. "Studies show financial-literacy classes have little long-term effect," Kraus said. "Telling stories to your grandchildren about the money mistakes you've made, along with the wise financial moves you've made, can have a lasting impact, especially if they see how it has affected the generations."

One planner recommended recreating his grandfather's tradition of pulling a dollar from the child's ear and requiring it be saved, creating powerful positive memories around saving.

"Whenever I would visit my grandparents as a child, my grandfather would magically pull a dollar, a bill or coin, from out of my ear," Jamie Ebersole, a certified financial planner with Ebersole Financial, said. "He would then give me the dollar with the expectation that I would save it in my passbook savings account. I have strong memories of visiting the local savings and loan with my mother and adding the dollar to my account."

While it isn't a lot of money, Ebersole said the ritual reinforced the importance of saving in a very concrete and personal way.

Build systems for stewardship

Try using physical jars for saving, spending and giving when grandchildren are young, and then transitioning to digital tools.

"I encourage grandparents to think about giving in phases," said Brenna Baucum, a certified financial planner with Collective Wealth Planning. "In the early years, focus on building hands-on habits. There's something powerful about children actually touching and handling money - unlike adults, who mostly swipe cards or pay digitally."

Simple systems like the three-jar method (one for saving, one for spending and one for giving) help young kids connect with the value of money, she said. As they get older, tools like Greenlight or GoHenry can teach budgeting and responsible spending. Many credit unions offer similar accounts for free as well.

Charitable giving decisions can teach values and responsibility while creating family conversations about priorities.

"When new grandparents think about setting their grandchildren on a path to financial security, the first instinct is often to save," said Jason Craine, a certified financial planner with Savvy Wealth. "And that's certainly important. Starting early with savings and investment accounts allows time and compounding to do their work. But lasting financial security isn't just about dollars; it's about values."

One of the most powerful gifts grandparents can give, Craine said, is a framework for stewardship. "I often encouraged families to use a donor-advised fund as a teaching tool," he said. "By letting children help choose which charities or causes to support, grandparents sparked conversations about generosity, responsibility and priorities."

A donor-advised fund, or DAF, is like a charitable investment account dedicated solely to supporting the causes and organizations you care about. Those same conversations, Craine said, naturally open the door to lessons about saving, investing and making thoughtful financial decisions.

"When grandparents modeled stewardship and invited their grandchildren to take part in those decisions, they passed on more than money - they passed on the habits and mindset that help create lasting security for future generations."

Support the whole family

An indirect approach to helping grandchildren is supporting overwhelmed parents.

"Raising children can be one of the most stressful times in an adult's life," said Annie Garland, a certified financial planner with Wealth Clarity. "If grandparents have the means to help financially, offering to pay for a babysitter, date night, meal-delivery service or, as they get older, activities or a week of summer camp could provide a significant relief to your adult children."

In doing so, she said, "you may be supporting your grandchild and being able to participate in a worthwhile activity that the parents may not have been able to fund without your help."

Communicate and coordinate

Ultimately, planners emphasized that family coordination is essential when grandparents step in to help set up grandchildren for financial success.

Practical discussions about inheritance and expectations is a good place to start.

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