If you’re a grandparent struggling with what to get your grandkids this Christmas, your own children have an idea for you that doesn’t involve online shopping or hitting up the local mall: college money.
According to a survey by Upromise, the savings division of lender Sallie Mae, 3 in 4 parents don’t expect their kids’ grandparents to give them a gift during the holiday season.
But if grandma and grandpa insist on buying the kids a present, the majority of parents (68 percent) would rather have their child receive money for college than a physical gift. Of all parents surveyed, millennials were the most likely to say they prefer cash for their child’s college fund as an ideal gift (78 percent).
“Most would assume the typical holiday wish list includes the latest smartphone or gadget, but we are increasingly seeing parents — especially millennial parents — focus more on the long term and contributions to a college fund as an ideal gift,” said Rick Castellano, vice president of corporate communications for Sallie Mae.
Interestingly, though parents think money for their children’s college fund is the best gift, more than half (57 percent) don’t feel comfortable asking loved ones to help fund their child’s education.
Giving your child or grandchild money for college has the potential to make a big impact down the road, MarketWatch reports:
Consider: If you give a child just $150 each holiday season toward college and do this from infancy through age 18, the child could have more than $4,000 toward college — and that’s assuming a modest 4 percent annual return on investment. Throw in a college donation at each birthday, and you could see that total double, though, of course, you’d have to invest the money somewhere (a 529 plan is a good option), as savings accounts these days don’t have high yields.
(If you hope to send your kids to college someday and don’t know about 529 College Savings Plans, you should. Click here to learn what you need to know about this excellent investment vehicle for funding education.)
On the flip side, let’s say the child has to borrow that $8,000 to pay for college. Considering that, as a rough rule of thumb, for every $1 a child borrows, she pays back $2, that $8,000 she had to borrow could cost her $16,000. So, give her $150 a year from the time she is an infant and she can spend that $8,000 on school and not have to repay it — or she may end up forking over $16,000 down the road.
Sure, money for college isn’t as exciting to younger children as a new drum set or Barbie doll, but rest assured: It’s a gift they will appreciate when they head to college, and it has the potential to affect their lives for years to come.
What do you get your grandchildren for holiday and birthday gifts? Share your comments below or on our Facebook page.