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Kids' Best Financial Adviser: Grandma or Grandpa

Kissing piggy bank

Grandparents apparently hold more sway over their grandchildren's saving habits than they know.

According to a survey by  TIAA-CREF, a New York-based financial services firm, most young adults (73 percent) say their grandparents do influence their money decisions and more than half call their elders excellent savers. Yet few grandparents capitalize on their standing: Only 8 percent say they've had or are likely to have a conversation with their grandchildren about money.

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Among the people surveyed, 1,003 were ages 18 to 24. Another 1,000 were grandparents 50-plus who had an annual income of at least $50,000, with investable assets of $100,000 or more.

"Young adults are surprisingly open to talking with their grandparents about money, regardless of the generation gap," Joseph Coughlin, director of the Massachusetts Institute of Technology AgeLab, who collaborated with TIAA-CREF on the study, said in a statement.

"Conversations about money over time could help young adults more than their grandparents realize," he said.

An AARP study on grandparenting released in 2012 showed that older adults feel gratified that they are able to help shape another generation.

The financial advice passed on from the generation that lived through the Great Depression, and now from boomers to their grandchildren, has pretty much stayed the same: Live within your means, save as much as you can and spend cautiously. With pension plans fading fast, grandparents and parents alike are also making sure their young adults understand the importance of saving for retirement as early as possible, since that responsibility will fall more squarely on their shoulders.

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Today's young adults are also feeling the financial pressures of soaring higher education costs. In the survey, 29 percent report that their grandparents have either contributed to their educational expenses or are currently helping them. But some of the elders surveyed woefully underestimated the cost of tuition.

The bill for a four-year education at a public in-state college is about $100,000, the survey said. Yet 20 percent of grandparents thought it was closer to $30,000 to $50,000.

Financing an education has changed dramatically since grandmom and grandpop raised kids. Today many parents use tax-advantaged 529 plans to save for their children's education. Yet a majority of the grandparents surveyed said they hadn't heard of 529 savings plans, which allow earnings on contributions to grow tax-deferred. Withdrawals that are used to pay for qualified higher education expenses are tax-free. Some states offer additional benefits, such as an income tax deduction or a tax credit on contributions.

To learn more about 529 college savings plans, visit

Photo: PonyWang/iStock


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