'I'm on a fixed budget': Silver and gold are too rich for my blood. What else can I gift my adorable grandchildren?

By Quentin Fottrell

'I've already listed them as beneficiaries on my 401(k)'

"I'm on a fixed budget, but I want them to have a little something." (Photo subject is a model.)

Dear Quentin,

What ideas do you have for setting something up for my grandchildren, ages 4 and 2? They don't sell savings bonds at banks anymore. Silver and gold bars are a little out of my price range. I'm on a fixed budget, but I want them to have a little something. I've already listed them as beneficiaries on my 401(k). I'm wondering what people usually do for their kids or grandchildren.

Grandmother

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You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

I will proceed on the basis that you can afford retirement with enough money to see you through to the final curtain, while being able to give your grandchildren a head start in life.

Dear Grandmother,

U.S. savings bonds are actually still available online, exclusively through the government website TreasuryDirect.gov. U.S. Series I Savings Bonds are an option - for Americans - through TreasuryDirect. There is a minimum purchase of $25. These bonds are inflation-protected and are quite popular with grandparents.

Showing your confidence in a young mind is priceless, whether it's with the gift of stocks or 529 plans for your grandchildren's education, particularly when the older generation did not have the same educational opportunities. You can keep it relatively simple, and even a few thousand dollars could help broaden their horizons later on.

You can give your grandchildren a gold-star education or teach them about compounding. You can also set up custodial accounts, opened under the Uniform Transfers to Minors Act or the Uniform Gifts to Minors Act. UGMAs typically contain securities, while UTMAs can hold other assets, including real estate.

You can keep it relatively simple, and even a few thousand dollars could help broaden their horizons later on.

With these types of accounts, you can take advantage of the annual gift-tax exclusion amount, which for 2025 and 2026 is $19,000 per person. The lifetime gift-tax exclusion will rise to $15 million next year from $13.99 million (but this will likely change over the next few years, as your grandchildren get older).

Any money you deposit in such an account is an irrevocable gift, meaning the funds have been removed from your estate, and your heirs will not benefit from a step-up in basis on these assets when you die. (Irrevocable trusts can contain spendthrift protections; UTMA assets cannot.) Be careful of "kiddie tax" exposure (where taxes are paid at your rate to prevent families from avoiding taxes).

The courts have ruled that 529 plans should be treated as gifts for tax purposes, even though they're in a parent's name. Setting up tax-advantaged 529 accounts for your grandchildren will do more than just help pay for their education, it will instill in them the expectation that they will have a college education.

Make sure you have funds set aside for the remainder of your life and for your spouse's life, too, if they are still with you, and create an emergency fund for unexpected expenses (should your house get damaged by a storm or you or your spouse need medical or long-term care). When you have run the numbers on your income and expenses, you can set up those 529s.

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Contributing to a 529 plan

You can contribute any amount to a 529, subject to your state's lifetime cap (usually several hundred thousand dollars). In 2026, recipients can use up to $20,000 per year for K-12 tuition, with expanded coverage for vocational and homeschooling expenses. You can also contribute up to the aforementioned annual gift-tax exclusion without having to report it to the IRS.

Just as with a 401(k) or IRA, those contributions add up. As Fidelity notes, a $50 monthly contribution could total more than $12,800 in 15 years; a $150 monthly contribution could reach more than $38,000 after 15 years; and a $250 monthly contribution could leave the recipient with nearly $64,000 after the same period of time.

These estimates show how a 529 might grow, assuming a 4.5% average annual return. They do not reflect an actual investment or account for taxes, fees, expenses or inflation, which would reduce returns, Fidelity says. Contributions to a 529 plan are made with after-tax dollars. As always, investments involve risk and past performance does not guarantee future results.

Showing your confidence in a young mind is priceless, whether it's with the gift of stocks or 529 plans.

When used for qualified expenses, 529 accounts allow you to take advantage of tax-deferred growth and federal income-tax-free withdrawals for education costs including college, university or vocational school tuition and related expenses, as well as K-12 education costs (up to $20,000 per year starting in 2026) and student-loan payments up to a lifetime limit of $10,000, Fidelity adds.

"About two-thirds (68%) of parents and one-fourth (23%) of grandparents surveyed by Fidelity said saving for their children's or grandchildren's future education is a top financial goal," the financial services company adds. "Yet many people surveyed choose not to set up a 529 plan account, instead setting aside college funds in a regular savings or brokerage account, if at all."

To equalize your grandchildren's inheritance later, you can adjust the distribution in your will or trust, reducing their shares by the amount you have already given each of them. A "hotchpot clause" in your will ensures fairness by effectively deducting the advance gifts from their inheritance share, retroactively calculating what each heir has already received.

You didn't provide your age or assets, so I will proceed on the basis that you can afford retirement with enough money to see you through to the final curtain, while being able to give your grandchildren a head start in life. It's a privilege and an opportunity to be able to make a difference in their lives, even long after you have left this world behind.

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More columns from Quentin Fottrell:

I want to gift my grandnieces, ages 5 and 10, stocks. How do I make sure they get an equal amount when they turn 18?

'So much for holiday cheer': I saw a guest take a bottle of wine as they left a Christmas party. Do I tell the host?

'Is it a case of them or us?' We're in our 40s. Do we retire early in our 50s - or save for our kids' education?

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-Quentin Fottrell

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01-03-26 1730ET