For some overly financial health-conscious grandparents, simply saving for their children’s future is not enough. Upon reaching their retirement years, certain grandparents wish to make it a priority to begin putting money away for their grandchildren out of financial need or out of good old generosity.
But despite making saving for the grandkids a priority, retired grandparents aged 62 and older might find that they simply don’t have enough cash on hand to make it possible. This is where a reverse mortgage loan could come in quite handy. If the retired grandparents don’t plan on moving out of the family home they’ve been paying the mortgage on for decades, they can tap into all that equity they’ve built up.
If approved for a reverse mortgage, they can potentially collect up to a six-figure sum or more in one lump sum payment, or they can take it in monthly disbursements. The best part of this financial opportunity is they need never pay back the loan until they either leave the house or die. You can easily find out how much of a reverse mortgage you qualify for based on this calculator.
But what if you’re a grandparent who hasn’t yet reached retirement age and who is, in fact, quite a few years away from 62 years old? How can you go about saving for your grandchild or grandchildren’s future?
According to a new report, it’s generally believed that most grandparents enjoy helping their grandchildren whenever possible. Some grandparents are the type to watch the grandkids while their parents are both working full-time jobs, and others feel that their role is better suited to help out financially.
But it’s important to note that not all grandparents are in a position to help their grandchildren monetarily, especially in these hyperinflated times. Still, they feel the need to set at least something aside for the grandkid’s future.
The reason will vary. Some grandparents had to struggle to pay for their education and for their first home. With that in mind, they wish to give their grandchildren “an easier start to their life.”
Still, others will see it as a priority to help their children and avoiding the massive burden of taking on the grandkid’s student loan debt. But no matter the reason, there are several good ways grandparents can go about saving for their grandchildren’s future.
Here are just a few options you can look into right away.
The Savings Account
This might sound overly simplified, but one of the most effective ways to save for your grandkids is to open a savings account on their behalf. But beware that the easiest choices for saving are not always the best choices.
While placing money in an account for your grandchild will not decrease in terms of dollars, the interest rates on today’s savings accounts remain way below that of inflation. This means the purchasing power of the money you are saving today will decrease over the course of many years.
If you decide to open a savings account at an FDIC-insured bank, you need to look for a “high-yield savings account.”
CDs or Certificates of Deposit
Despite low-interest rates, you can get a higher return than a savings account by opening up a CD or certificate of deposit. In general CDs will give you a higher interest rate on your cash so long as you make a contractual promise that you will not be withdrawing the money for a specific period.
CD terms are said to be as brief as a few months (or even a single month). But longer-term CDs will offer much higher interest rates. That said, you might not want to lock into a fixed rate long-term certificate of deposit if interest rates are rising.
The Brokerage Account
The gutsy grandparent who is willing to withstand some risk for potentially much higher returns than a savings account and/or CD might wish to invest their cash into a brokerage account. By opening a brokerage account, you can invest for your grandchildren in bonds, ETFs, mutual funds, stocks, cryptos like Bitcoin, and other varieties of investments like real estate and precious metals.
The best part about a brokerage account is that given time (ten years or more), brokerage-related investments will always “provide higher returns than savings accounts.” However, you must keep in mind that the money you invest could also lose some of its value, and this is why it’s important to maintain a diversified portfolio.
But it if you’re investing in your grandchild’s future from the very beginning of his or her life, you have a full 18 years to go about investing before they require even a single dollar of what you’ve been putting away for their future.
That’s a long time, and when it comes to investing, time is always on your side.
