We frequently use the term wealth acceleration with our clients. We don’t want to accumulate wealth in our lifetime. We want to be the ones in our family tree who build wealth as a vehicle for legacy.
The mindsets and wisdom we pass on are just as important–if not more so–than what we accumulate in our lifetime.
I’m thankful to say that many of our clients share this core piece of DNA. To bring this back to the realm of tactical planning, I’m laying out 3 specific financial planning decisions we use with our clients to accelerate both wealth and wisdom in the next generations. Want to set your grandkids up for long-term financial success? Here are seven strategic ways to help:
Here’s an article on how grandparents can help jumpstart the financial success of their kids and grandkids:
1. Fund 529 Accounts for Your Grandkids
Two things are true when it comes to saving for education. Time is your best asset, and your adult children don’t always have enough spare cash flow early in their families’ lives to invest heavily in long-term savings.
We strongly encourage our grandparent clients to consider front-loading 529 investments for their grandkids as they are able. Here are a few reasons why:
- Starting early, you can get 18 years of market growth on your initial investment. Far better than only starting to save seriously when they are teenagers.
- You model for your adult children the value of strategic thinking.
And currently, unused funds have enormous value. Up to $35,000 can be rolled into a Roth IRA to continue several more decades of tax-free growth. Also, the remaining funds can form the beginning of a multi-generational education fund that is growing tax-free. That can change a family tree.
Contribute regularly and consider front-loading up to five years’ worth of gift-tax-free contributions (currently $18,000 per year per beneficiary in 2025, or $90,000 at once with gift-tax exclusions).
2. Open (or Contribute to) a Roth IRA for Kids or Grandkids
If your grandchild has earned income (even from a summer job or side hustle), they can contribute to a Roth IRA. You can gift them the contribution amount to encourage early investing.
In addition to the massive running start that money gets, you’re once again modeling for kids and grandkids the value of longer-term financial strategy.
A personal note here: during a tight year, my oldest daughter had to scale back her own Roth 401k contributions. To the surprise of someone who said, “Ah, you’ve got plenty of time,” she responded adamantly: “Do you know how much that would be worth in 50 years? That’s a big decision!” Add that to the list of things that make me smile.
The contribution limit for 2025 is $7,000 (or $8,000 for those over 50). If your grandchild earns $5,000 in a part-time job, you can gift them the money to contribute to a Roth IRA.
3. Gift Stocks or ETFs to Teach Investing
When we talk about gift limits, there are not many of us who would want to gift $19,000-$38,000 in cash to our kids (the current limit without gift tax). Cash has an unfortunate way of being poorly used when we get a large sum of it all at once.
I am much more interested in gifting financial vehicles that can grow in value and limit impulsive spending. Remember, we are equally interested in financial success and financial stewardship.
One very good example of this is gifting appreciated stock to kids or grandkids. It is great for younger generations because this is a great format to initiate conversations around the value of investing.
You probably know by now that I'm a massive fan of reading. This is a great opportunity to pair a gift with a favorite book on financial matters, especially investing. If you need a good recommendation, I'm happy to share a few based on who you're recommending a book to.
Similarly, for those of us in the sandwich generation, this can also be a great way to support aging parents who need help with the cost of care. They can often sell the appreciated stock at a lower tax bracket than you can, helping cover their costs in a tax-efficient way.
Final Thoughts
We have come to like the phrase, “It's not what you leave to your family. It's what you leave in them.”
While this is first and foremost a relational, we also want to ensure that we are helping the next generation launch successfully, not just in terms of their bank accounts or portfolios. We want them to launch successfully because of the wisdom we impart to them.
This is a key part of the financial planning process for those in our Peak earning years or post-career. If you are looking for ways to begin investing more intentionally in your family now, financial planning is the vehicle that can help you put this desire into practice.